Bond Mechanism
What are CBOND (Bonds)?
Bonds are unique tokens that can be utilized to help stabilize CHICKEN price around peg (1 FTM) by reducing circulating supply of CHICKEN if the TWAP (time-weighted-average-price) goes below peg (1 FTM).
When can I buy CBOND (Bonds)?
CBOND can be purchased only during contraction periods, when TWAP of CHICKEN is below 1.
At the beginning of every new epoch during contraction periods, CBONDs are issued in the amount of 3% of current CHICKEN circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of CHICKEN, no more bonds will be issued.
CBOND TWAP (time-weighted average price) is based on CHICKEN price TWAP from the previous epoch as it ends. This mean that CHICKEN TWAP is real-time and CBOND TWAP is not.
Where can I buy CBOND (Bonds)?
You can buy CBONDs if any are available, on the Bonds page at MyChicken.Farm, anyone can buy as many CBONDs as they want as long as they have enough CHICKEN to pay for them.
There is a limit of available CBONDs per epoch during contraction periods (3% of CHICKEN's current circulating supply), and are sold first-come-first-serve.
Why should I buy CBOND (Bonds)?
First and most important reason is Bonds help maintain the peg, but they are not the only measure in place to keep the protocol on track.
CBONDs don't have an expiration date, so you can view them as an investment in the long-term health of the protocol to be redeemed for a premium at a later date.
Incentives for holding CBOND
The idea is to reward CBOND buyers for helping the protocol, while also protecting the protocol from being manipulated by big players.
So after you buy CBOND using CHICKEN, you get 2 possible ways to get your CHICKEN back:
Sell back your CBOND for CHICKEN while the peg is between 1 - 1.1 (1 FTM) with no redemption bonus. This is in place to prevent an instant dump as soon as peg is recovered.
Sell back your CBOND for CHICKEN while the peg is above 1.1 (1FTM) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from CBONDs.
Example:
When CHICKEN= 0.8, burn 1 CHICKEN to get 1 CBOND (CBOND price = 0.8)
When CHICKEN = 1.15, redeem 1 CBOND to get 1.105 CHICKEN (CBOND price = 1.27)
So, which one is better?
If I buy CHICKEN at 0.8, and hold it until 1.15 and then sell, I'm getting +0.35$ per CHICKEN
But, if I buy CHICKEN at 0.8, burn it for CBOND, and redeem it at 1.15, I'm getting 1.105 CHICKEN* 1.15 (CHICKEN current price) = 1,271 (+0.47$) per CBOND redeemed.
But what if getting back to peg is taking too long ?
We will adjust our use cases, to have different behaviors on contraction and expansion periods to benefit both CHICKEN and CBOND holders when needed.
What is the formula to calculate the CBOND redemption bonus?
To encourage the redemption of CBOND for CHICKEN when CHICKEN's TWAP > 1.1 and in order to incentivize users to redeem bonds at a higher price, CBOND redemption is designed to be more profitable with a higher CHICKEN TWAP value. The CBOND to CHICKEN ratio is 1:R, where R can be calculated using the formula as shown below:
When can I swap CBOND for a premium?
You can only redeem CBONDs for a premium when the previous epoch's TWAP is greater than 1.1.
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