Bonds Mechanism
Come to the rescue of RUBY and get it back to peg while making a healthy lucrative profit!
SAPPHIRE are sold by the protocol when the RUBY price is under peg of 1 WCRO. Bonds can be purchased as “RUBY at a discount” since bonds can be redeemed back to higher RUBY price once it reaches peg. All RUBY used to buy SAPPHIRE is burned to help reduce supply. SAPPHIRE holders are incentivised to hold their token longer as the reward (in RUBY) increases quadratically with price movements.
What are SAPPHIRE (Bonds)?
SAPPHIRE are unique tokens that can be utilized to help stabilize RUBY price around peg (1 RUBY = 1 WCRO) by reducing circulating supply of RUBY if the TWAP (time-weighted-average-price) goes below peg (1 RUBY = 1 WCRO).
When can I buy SAPPHIRE (Bonds)?
SAPPHIRE can be purchased only on contraction periods, when TWAP of RUBY is below 1.
Every new epoch on contraction periods, SAPPHIRE are issued in the amount of 3% of current RUBY circulating supply, with a max debt amount of 45%. This means that if bonds reach 45% of circulating supply of RUBY, no more bonds will be issued.
To encourage redemption of SAPPHIRE for RUBY when RUBY TWAP > 1.02 and incentivize users to redeem at a higher price, SAPPHIRE redemption will be more profitable with a higher RUBY TWAP value, of which SAPPHIRE to RUBY ratio will be 1:R, where R can be calculated in the formula as shown below:
Where coeff = 0.7
Note: SAPPHIRE TWAP (time-weighted average price) is based on RUBY price TWAP from the previous epoch as it ends. This means that RUBY TWAP is real-time and RBOND TWAP is not.
Where can I buy SAPPHIRE (Bonds)?
You can buy SAPPHIRE if any are available, anyone can buy as many SAPPHIRE as they want as long as they have enough RUBY to pay for them.
There is a limited amount (3% of RUBY current circulating supply) of available SAPPHIRE per epoch while on contraction periods, and are sold as first come first serve.
Why should I buy SAPPHIRE (Bonds)?
First and most important reason is Bonds help maintain the peg, but will not be the only measure used to keep the protocol on track. We also have a DAO fund which will step in and buy RUBY to get it back to peg.
SAPPHIRE don't have a expiration date, so you can view them as a investment on the protocol, because long-term you get benefits from holding bonds.
Incentives for holding SAPPHIRE
The idea is to reward SAPPHIRE buyers for helping the protocol, while also protecting the protocol from being manipulated from big players.
So after you buy SAPPHIRE using RUBY, you get 2 possible ways to get your RUBY back:
Sell back your SAPPHIRE for RUBY while peg is between 1 - 1.02 (1 RUBY = 1 WCRO) with no redemption bonus. This to prevent instant dump after peg is recovered
Sell back your SAPPHIRE for RUBY while peg is above 1.02 (1 RUBY = 1 WCRO) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from SAPPHIRE.
Example:
When RUBY = 0.8, burn 1 RUBY to get 1 SAPPHIRE (SAPPHIRE price = 0.8)
When RUBY = 1.15, redeem 1 SAPPHIRE to get 1.105 RUBY (SAPPHIRE price = 1.27)
So, which one is better?
If I buy RUBY at 0.8, and hold it until 1.15 and then sell, I'm getting +0.35$ per RUBY
But, if I buy RUBY at 0.8, burn it for SAPPHIRE, and redeem it at 1.15, I'm getting 1.105 RUBY* 1.15 (RUBY current price) = 1,271 (+0.47$) per SAPPHIRE 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 RUBY and SAPPHIRE holders when needed.
Note: For redemption of bonds, there are two requirements: The last hour TWAP is >1.01, and with the "Treasury" at 0x...(TBD) has enough RUBY balance (which is emitted in boardroom when above peg) to support the transactions & exchange of SAPPHIRE for RUBY.
The current Treasury RUBY balance will be available on the bonds page at URL.io/bond for better understanding of the amount of bonds which can be redeemed. New RUBY are added to Treasury every epoch (similar to boardroom) so this value will constantly update.
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