Bonds Mechanism
Bonds are unique tokens that can be utilized to help stabilize OWL price around peg (1 MOVR) by reducing circulating supply of OWL if the TWAP (time-weighted-average-price) goes below peg (1 MOVR).
Every new epoch on contraction periods, OBONDs are issued in the amount of 3% of current OWL circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of OWL, no more bonds will be issued.
Note: OBOND TWAP (time-weighted average price) is based on OWL price TWAP from the previous epoch as it ends. This mean that OWL TWAP is real-time and OBOND TWAP is not.
You can buy OBONDs if any are available, through the Treasury on athenamoney.org, anyone can buy as many OBONDs as they want as long as they have enough OWL to pay for them.
There is a limit amount (3% of OWL current circulating supply) of available OBONDs per epoch while on contraction periods, and are sold as first come first serve.
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.
OBONDs don't have a expiration date, so you can view them as a investment on the protocol, because longterm you get benefits from holding bonds.
The idea is to reward OBOND buyers for helping the protocol, while also protecting the protocol from being manipulated from big players.
So after you buy OBOND using OWL, you get 2 possible ways to get your OWL back:
Sell back your OBOND for OWL while peg is between 1 - 1.1 (1 MOVR) with no redemption bonus. This to prevent instant dump after peg is recovered
Sell back your OBOND for OWL while peg is above 1.1 (1 MOVR) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from OBONDS.
When OWL = 0.8, burn 1 OWL to get 1 OBOND (OBOND price = 0.8)
When OWL = 1.15, redeem 1 OBOND to get 1.105 OWL (OBOND price = 1.27)
If I buy OWL at 0.8, and hold it until 1.15 and then sell, I'm getting +0.35$ per OWL
But, if I buy OWL at 0.8, burn it for OBOND, and redeem it at 1.15, I'm getting 1.105 OWL * 1.15 (OWL current price) = 1,271 (+0.47$) per OBOND 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 OWL and OBOND holders when needed.
OBOND TWAP (time-weighted average price) is based on OWL price TWAP from the previous epoch as it ends. This mean that OWL TWAP is real-time and OBOND TWAP is not. In other words, you can redeem OBOND for a bonus when the previous epoch's TWAP > 1.1.
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