💰Bonds Mechanism
What are MBOND?
Bonds are unique tokens that can be utilized to help stabilize SVN price around peg (1 MMF) by reducing circulating supply of SVN if the TWAP (time-weighted-average-price) goes below peg (1 MMF).
When can I buy MBOND?
MBOND can be purchased only on contraction periods, when TWAP of SVN is below 1.
Every new epoch on contraction periods, MBONDs are issued in the amount of 3% of current SVN circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of SVN , no more bonds will be issued.
Note: MBOND TWAP (time-weighted average price) is based on SVN price TWAP from the previous epoch as it ends. This mean that SVN TWAP is real-time and MBOND TWAP is not.
Where can I buy MBOND?
You can buy MBONDs if any are available, through the PIT on Savanna Finance, anyone can buy as many MBONDs as they want as long as they have enough SVN to pay for them.
There is a limit amount (3% of SVN current circulating supply) of available MBONDs per epoch while on contraction periods, and are sold as first come first serve.
Why should I buy MBOND?
First and most important reason is Bonds help maintain the peg, but will not be the only measure use to keep the protocol on track.
MBONDs don't have a expiration date, so you can view them as a investment on the protocol, because long-term you get benefits from holding bonds.
Incentives for holding MBOND
The idea is to reward MBOND buyers for helping the protocol, while also protecting the protocol from being manipulated from big players.
So after you buy MBOND using SVN, you get 2 possible ways to get your SVN back:
Sell back your MBOND for SVN while peg is between 1.01 - 1.1 (1 MMF) with no redemption bonus. This to prevent instant dump after peg is recovered
Sell back your MBOND for SVN while peg is above 1.1 (1 MMF) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from Mbonds.
Example:
When SVN = 0.8, burn 1 SVN to get 1 MBOND (MBOND price = 0.8)
When SVN = 1.15, redeem 1 MBOND to get 1.105 SVN (MBOND price = 1.27)
So, which one is better?
If I buy SVN at 0.8, and hold it until 1.15 and then sell, I'm getting +$0.35 per SVN
But, if I buy SVN at 0.8, burn it for MBOND, and redeem it at 1.15, I'm getting 1.105 SVN * 1.15 (SVN current price) = 1.271 (+$0.47) per MBOND redeemed.
But what if getting back to peg is taking too long?
We are going to adjust our use cases, to have different behaviors on contraction and expansion periods to benefit SVN and MBOND holders when needed.
When can I swap MBOND for a bonus?
MBOND TWAP (time-weighted average price) is based on SVN price TWAP from the previous epoch as it ends. This mean that SVN TWAP is real-time and MBOND TWAP is not. In other words, you can redeem MBOND for a bonus when the previous epoch's TWAP > 1.1.
Last updated
