Bonding is a GTON Capital revenue generation protocol and the main source of AMM liquidity for GTON. Bonding enables users to buy GTON from the treasury with a discount.
Bonding is a mechanism of liquidity accumulation by CTON Capital 🏛 through selling GTON to potential holders with a discount. Some specific features of GTON Capital bonding mechanism
- Bonding is a GTON Capital revenue generation protocol and the main source of AMM liquidity for GTON (POL, protocol owned liquidity).
- A buyer interacts with a smart contract to buy a locked GTON allocation.
- The locked allocation is stakable to make B attractive, therefore Zap-Bonding-Staking (ZBS).
- Bonding is a fundamental factor for 🧬PW because it attracts new liquidity to AMMs and pushes PWPeg up.
There are two types of bonding:
- 1.Short-term bonding (STB)1 week lock (~7 days) with daily linear unlock starting from +1 day after lock tx. Discount Rate is 7%. Permissionless.
- 2.Medium-term bonding (MTB) 3 months lock (~90 days) with daily linear unlock started from +1 day after lock tx. Discount Rate is 15%. Permissionless.
- According to the 🧬PW v1.x DAO vote, we agreed to have ~25% circulating supply at the end of the period (20 epochs). Therefore, the circulating supply will be 0.25·21mln = 5.25mln GTONs. 25% of this amount can be released in the form of staking rewards. So, 1.3 mln from that is allocated for 🪙Staking, which means we can set up 5.25 - 1.3 - 2.1 = 1.85 mln (~9% supply) GTONs for bonding.
- STB allocation is 1.2 mln GTONs (~2/3 of bonding allocation) and BTB is 0.65 mln GTONs (~1/3 of bonding allocation).
- OlympusDAO discount rates and vesting is used as a reference.
- Those discounts are correlated with weekly and monthly volatility for GTON.
All GTONs locked via bonding also automatically generate APY from staking.
After the DAO vote, bonding is only activated when the price is above $5 and can be halted if the price falls until it recovers to the $5 level.
To prevent big players from draining the entire bonding allocation, we impose limit terms: bonding campaigns run a limited number of times, short-term bonds up to 6 times per year, medium-term bonds up to 4 times per year.
The bond limit per whitelisted address is 100 000 GTON. The bonds will be sold in allotted 7 day time periods, which will be announced 6 and 4 times per year for short-term and medium-term bonds, respectively.
To increase the number of engaged users, we are introducing a referral program, which will soon be available in the CLI and covered in a separate blog post. Each whitelisted user can whitelist 3 non-whitelisted addresses, and the referral gets to buy bonds from the referrer’s whitelist allocations with the same purchase limit (up to 100 000 GTON).
By purchasing a bond, the user buys GTON directly from the Treasury, but at a fixed discount to the current market price of GTON, locked for a fixed period of time. The bondholder’s return depends on the price of GTON at the time when the bond expires, however the return on investment should also include autostaking applied to the bond at the time of vesting.
Technically, with a bond, the user buys sGTON, which represents staked GTON, in the form of an NFT storing the details of the position (amount, time of purchase, bond expiration date etc).
During the vesting period, the bond increases its value in GTON via in-built staking: as long as the user holds a bond, the 22,32% APR in GTON is accrued. Thus, Bond NFTs could be the basis of an exciting new class of DeFi derivatives.
A bond NFT can change hands as often as necessary until its lifespan runs out, at which point the current owner can unlock the liquidity.
When an NFT expires, it can be burned to use sGTON (still in staking) without any additional action to put GTON into staking: the staking reward generation continues as soon as the NFT is burned and sGTON unlocked. However, if the user intends to use actual GTON (for trading/farming in other DeFi applications) they will have to unstake GTON i.e. exchange sGTON to GTON.
The first use of the funds coming from the bonds into the Treasury reserves is to create a large USDC/GTON liquidity pool on Uniswap as part of the Roadmap.
Bonding will be more profitable than staking at some point However, STBs are restricted in terms of amount and “bond sale” campaign time limits. If bond sales events only happen once per 2 months, it only yields 42% ROI in GTON. For MTBs, there are no time limits since it is only possible to repeat it 4 times, which is 4*15 = 60% ROI in GTON. Therefore, there are 3 strategies: ⚜️ Buy and stake: 23% APR (25 APY with compounding)
⚜️ Active 7d re-bonding: ~45% ROI ⚜️Active 3m re-bonding: ~63% ROI Different strategies have different pros/cons, but they all are needed to generate revenue for CTON Capital.