Bonding Mechanics
The implementation of bonding mechanics is built with the goal of offering bonds for virtually any ERC20 token, pricing structure, and issuance model.
This mechanism gives the Policy Team a vast arsenal of tools to increase Treasury, as both pricing and issuance are designed to support plug-and-play models.
Composable bonds allow for the constant innovation of new bonding products and pricing models to be put into production without the redeployment of smart contracts. Upon protocol launch, Concave will focus on fixed-term accrual bonding of stable coins and LP tokens using custom bond pricing models.
Bond issuance will be optimized and controlled by an off-chain algorithm that will manage target debt by generating a desired supply curve and accelerate bond issuance as a function of market
conditions. Simply put, the protocol will maximize the value of the treasury with respect to supply.
In contrast, the Olympus model maximized supply with respect to the treasury. This ensures bond issuance is accelerated or decelerated when the maximum return can be rewarded to staked investors while aggregate supply growth is regulated.
The custom bond pricing model leverages the idea of virtual AMM reserves popularized by Uniswap V3. Virtual reserves are used in conjunction with actual reserves to derive pricing. Policy can modify virtual reserves to directly influence bond pricing as well as price impact. Since the only direct influence users have on price is positive, we artificially create negative price action through a time based decay mechanism.
This AMM approach expands on the traditional xy=k market making formula by utilizing virtual values. The variables x,y, and k are a derivative of the real assets. Since they are virtual, they can be adjusted dynamically to control the amount of slippage that occurs when calculating the bond price.
Therefore, controlling for slippage adjusts the bond price with respect to the bond debt available and the size of the bond purchase.
Last modified 6mo ago