Why you should bond?

Jun 1, 2022

Hello Miners! As we near the launch of our bonding and staking features, we want to go over what bonding is, the improvements we have made to its functionality, and why you will want to bond with Concave.

What is Bonding?

In layman’s terms, bonding is the process in which users exchange their LP tokens in return for a protocol’s native token. Traditionally, if a protocol needed liquidity for their token, they would either have to purchase their own LP tokens with treasury funds or bribe users to provide LP, usually with their native tokens. The issue with this is that many early-stage protocols did not have the resources to buy their own liquidity, and bribing users to provide LP tokens would only be a short-term solution that would also incentivize users to dump the tokens later on. Thus, a more efficient solution was required, and bonding and protocol-owned liquidity were born. With bonding, protocols can create and grow protocol-owned liquidity that they will hold forever.

Why Should I Bond?

Concave mainly incentivizes bonding with variable discounts that we offer to users when exchanging their LP tokens for CNV. In exchange for providing your LP tokens to Concave, you will receive native CNV tokens based on the discount rate that will be vested over 5 days. Discounts will change, but at launch, we will be offering steeper discounts to bootstrap the launch of our bonds.

Note: Actual bonding discounts are dependent on many external factors such as demand. We recommend taking a careful look at the discount rates and making an educated decision on when to bond.

How does Concave bonding differ from other bonding products?

In short, our bonding mechanism contains both on-chain and off-chain algorithms that give us more precise control over bonding variables. Concave bonds have premium protection and better bond issuance, they do not dilute stakeholders who use our liquid-staking system (depending on term length), and they are more capital efficient.

Legacy bonding modes use a Step Function where one parameter would be set to control the bond price decay and price payout. This function doesn’t react to demand and requires manual input that would have to be done regularly. This allows for periods of time where bonds can be bought at drastically higher (or lower) discounts than intended, leading to inefficient outcomes.

Concave’s bonding model fixes this by implementing an xy=k curve in its AMM. For example, when someone purchases 100 CNV through our bonding, the bond prices update with each token bought. As time passes, these prices decrease if there is no volume. This model allows pricing to be more reactive to bond demand when compared to traditional legacy bonds.

How Do I Bond?

For specific instructions on how you can bond with Concave, we have a detailed article that you can follow here. We are excited to have you along with us on our release for bonding and staking. If you have any more questions, feel free to ask in our discord.