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Bond and Buyback Fund
On extreme market conditions, it is possible that the insurance pool is unable to fully cover all cash-out applications, the so-called "risk spill".
Since the insurance pool experiences net inflow in the long term, Derify Protocol will turn risks into bonds/bToken.
Rules are as follows:
- 1.If the redemption rate of the insurance pool is less than 100%, the system will issue bond token bToken to make up the redemption rate to 100%.
- 2.When the insurance pool overflows (insurance pool balance > system net loss), bToken holders can swap bToken (for e.g. bBUSD) for stablecoin at a fixed exchange rate of 1:1
- 3.The swapped bToken will be automatically burned
- 4.When there is no excess overflow of the insurance pool, the exchange of Margin Token will be suspended [1]
- 5.Stake bonds can receive annual interest of%.
- 6.Interest are distributed periodically, in the form of more bToken tokens.
- 7.bToken can be freely traded on the market.
Because of the existence of annual interest, bToken market price shall be worth a little more than the Margin Token. As long as the interest rate
% is reasonable, the bond mechanism is safe and stable.
The interest rate
is also a changeable constant and can be adjusted via DAO community voting.
Bond is the final risk compensation mechanism for the Derify Protocol.
[1] First-come-first-served basis.
Last modified 3mo ago