xBOND: ELI5
In the quest for a stable algorithmic stablecoin, Dollar Protocol is introducing a 3rd token, called xBOND.
xBOND is a fungible token that represented vested ownership of the dollar protocol growth.
Overview
1: Any user can mint xBOND by locking up USD into our smart contract (https://dollarprotocol.com/#/bond)
2a: During positive rebases:
- xBond = USD * Bond Supply / Locked USD
- USD = xBond * Locked USD / Bond Supply
- Know that minting xBond during positive rebases is more risky than minting during a negative rebase, as the time to recover principle may be longer. Shorter term horizon users should consider buying Share or providing LP to participate in seigniorage.
2b: During negative rebases:
- To mint new xBond, 1 xBond = 1 USD. Locked USD and xBond circulation do not change.
- This is important because it provides an added incentive for USD to get locked during negative rebases. In addition, it provides a way for the xBond supply to locked USD ratio to be closer to 1:1, allowing new participants to enter at a more attractive rate.
2c: During neutral rebases:
- No change to xBond : USD ratio for minting
3: xBOND earns pro-rata seigniorage (currently 50% of the USD supply expansion)
For example, if you own 500 xBond and there are 5000 xBonds total supply, then you would be able to claim 10% of the 50% rebase.
4: xBOND and locked USD are immune from negative rebases. Free-floating USD will be debased during negative cycles.
5: xBOND can only be redeemed during positive rebases for seigniorage USD. They cannot be fully redeemed as this would cause a greater than necessary influx of USD into the market. Typically, if you mint xBOND early at a 1:1 ratio during a negative rebase, or if you expect there to be a long string of positive rebases in the near future, minting xBOND can be very profitable.
Scenario: The protocol mints 25,000 USD to the locked xBond pool. Every xBond user can unlock a pro-rata percentage of the 25,000 USD. So if you own 5% of the xBond supply, then you can redeem 1250 USD.
6: Users can freely trade xBOND on the open market.
