Bond system
As Bolt Dollar is an algorithmic Stablecoin it will keep expanding by minting BTD as long as the TWAP is above its $1.01 peg. Other Stablecoins that lacked stabilization mechanisms have sometimes fallen through that peg and spiralled downwards. This could happen if the demand for BTD dropped lowering its price and 'value' to investors.
To balance a scenario like this the bond system was put into place. When the Bolt Dollar drops below a TWAP (time-weighted average price) of $1.00 the protocol creates bonds (BTB) that can be acquired on the main Bolt Dollar website. These bonds can be bought with BTD and traded in for BTD when BTD climbs back above its peg. The ratio is 1 BTB for 1 BTD. So for instance when BTD is at $0.8 you can buy extra BTD at that price point, swap them for BTB. And trade them back to BTD when the price is above a TWAP of $1.01. Thus making a profit.
The bond system thus creates a higher demand for BTD and the extra market pressure will help increase the BTD price so it reaches peg again.
Bolt Dollar Ecosystem rules
- If TWAP is above $1.01 then 65% of all seigniorage is minted in the treasury until the debt is paid back. During this period boardroom stakers get 35% of seigniorage.
- If TWAP is above $1.01 and enough BTD has been minted for complete bond redemption (in treasury) boardroom stakers receive 100% of seigniorage.
Bonds in short: Bolt Bonds help bring the price of BTD back up if it falls under $1.00. When BTD is under $1.00, BTB can be purchased for BTD at a discount (Bond price = BTD TWAP * BTD TWAP). When BTD is above $1.01. BTB can be redeemed for BTD 1 to 1. Purchasing BTB burns BTD, reducing supply.
Example
- You have 100 BUSD
- BTD TWAP is $0.95
- BTD spot price is $0.97
- You use 100 BUSD to buy 103.0928 BTD
- The price of a bond is (TWAP * TWAP):
- 0.95 * 0.95 = $0.9025
- You trade your 103.0928 BTD for 114.2302 bonds
- The 103.0928 BTD is burned.
With enough people buying bonds the market will react and the BTD TWAP will rise to $1.03.
- An epoch later the BTD spot price is $1.05
- You redeem 114.2302 bonds for 114.2302 BTD
- That 114.2302 BTD is now worth 114.2302 * 1.05 = 119.9417 BUSD
Thus yielding a 19.94% profit with your efforts in pushing Bolt Dollar above its peg.
- In the current setup, the maximum purchasable amount of bonds (BTB) is set to 3% per epoch.
- Bonds have no 'expiration date'. You can hold them and trade them back for BTD at your discretion.
- The maximum debt cap for bonds is 35%
Last modified 1yr ago