Bonding

Bonds Overview

Bonding is the secondary value accrual strategy of Euphoria. Bonds both incentivize and lock liquidity by offering an attractive risk/reward profile.
When users mint WAGMI tokens, they are actually selling their assets in order to buy a bond from the protocol. Buying a bond entitles users to purchase WAGMI at a discount when the rates are favorable.
Bonds are a cross between a fixed income product, a futures contract, and an option. The protocol quotes the bonder with terms for a trade at a future date. These terms include a predefined amount of WAGMI the bonder will be entitled to, and the time when vesting is complete. The bond becomes redeemable as it vests - e.g. in a 5-day term, after 2 days into the term 40% of the rewards can be claimed.
Bonding is an active, short-term strategy. The price discovery mechanism of the secondary bond market renders bond discounts more or less unpredictable. Therefore bonding is considered a more active investment strategy that has to be monitored constantly in order to be more profitable as compared to staking.
Allowing users to purchases bonds by minting WAGMI allows Euphoria to accumulate its own liquidity. We call our own liquidity POL. More POL ensures there is always locked exit liquidity in our trading pools to facilitate market operations and protect token holders. Since Euphoria becomes its own market, on top of additional certainty for WAGMI investors, the protocol accrues more and more revenue from LP rewards bolstering our treasury, and allowing more rewards for stakers.

Bond Pricing

BondPrice=1+PremiumBond Price = 1 + Premium
Premium=BCVβˆ—DebtRatioPremium = BCV * Debt Ratio
The premium is derived from a scaling variable called the Bond Control Variable (BCV) and the debt ratio. Protocol controlled adjustments to the BCV allows us to control the rate at which bond prices increase. This ties the price of bonds to the number of bonds outstanding. The fewer bonds outstanding, the lower the premium, and the higher the discount.
Profits for the protocol, and in turn stakers, is determined from the premium. New WAGMI is minted from the protocol's profit and distributed to stakers.
DebtRatio=BondsOutstanding/WagmiSupplyDebtRatio = Bonds Outstanding / WagmiSupply
The debt ratio is the total WAGMI still due to be paid out to bonders divided by the total supply of WAGMI.