Bonds Mechanism

What is BOMB (Bomb Bonds)?

Bonds are unique tokens that can be utilized to help stabilize GOLD price around peg (1 $FTM) by reducing circulating supply of GOLD if the TWAP (time-weighted-average-price) goes below peg (1 $FTM).

When can I buy BOMB (Bonds)?

BOMB can be purchased only on contraction periods, when TWAP of GOLD is below 1.

Every new epoch on contraction periods, BOMBs are issued in the amount of 3% of current GOLD circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of GOLD, no more bonds will be issued.

Note: BOMB TWAP (time-weighted average price) is based on GOLD price TWAP from the previous epoch as it ends. This mean that GOLD TWAP is real-time and BOMB TWAP is not.

Where can I buy BOMB (Bonds)?

You can buy BOMBs if any are available, through the /Bonds on Pirate Finance, anyone can buy as many BOMBs as they want as long as they have enough GOLD to pay for them.

There is a limit amount (3% of BOMB current circulating supply) of available BOMBs per epoch while on contraction periods, and are sold as first come first serve.

Why should I buy BOMB (Bonds)?

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, more on that on DAO Fund section here.

BOMBs 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 BOMB

The idea is to reward BOMB buyers for helping the protocol, while also protecting the protocol from being manipulated from big players.

So after you buy BOMB using GOLD , you get 2 possible ways to get your GOLD back:

1. 1.

   Sell back your BOMB for GOLD while peg is between 1 - 1.1 ($FTM) with no redemption bonus. This to prevent instant dump after peg is recovered

2. 2.

   Sell back your BOMB for GOLD while peg is above 1.1 (1 $FTM) with a bonus redemption rate

The longer you hold, the more both the protocol and you benefit from BOMBs.

1. 1.

   When GOLD = 0.8, burn 1 GOLD to get 1 BOMB (BOMB price = 0.8)

2. 2.

   When GOLD = 1.15, redeem 1 BOMB to get 1.105 GOLD (BOMB price = 1.27)

If I buy GOLD at 0.8, and hold it until 1.15 and then sell, I'm getting +0.35$ per GOLD

But, if I buy GOLD at 0.8, burn it for BOMB , and redeem it at 1.15, I'm getting 1.105 GOLD * 1.15 (GOLD current price) = 1,271 (+0.47$) per BOMB 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 GOLD and BOMB holders when needed.

When can I swap BOMB for a bonus?

BOMB TWAP (time-weighted average price) is based on GOLD price TWAP from the previous epoch as it ends. This mean that GOLD TWAP is real-time and BOMB TWAP is not. In other words, you can redeem BOMB for a bonus when the previous epoch's TWAP > 1.1.