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