Introduction to Bonding

Bonding is a mechanism introduced by OlympusDAO that allows users to 'bond' assets to a protocol in exchange for another token at a discount over a fixed vesting period. This can be represented by the following formula:
X=Y×(1+D) X = Y \times (1 + D)
  • X = value received by bonder after vesting period
  • Y = value of assets bonded to protocol
  • D = bonding discount (%)
The bonding discount provides incentivizes bonders while bonded assets become backing for the minted synthetic and Protocol-owned-Liquidity ("PoL"). PoL can be deployed to earn yield and further grow backing.

Bonding $rDPX

rDPX v2 bonding utilizes the same logic to mint $DSCs.
Assuming $DSC to be minted is $dpxETH, the formula can be rewritten as the following:
X=Y(1+D)X = Y * (1 + D)
  • X = $dpxETH
  • Y = value of assets bonded to protocol
  • D = bonding discount (%) as derived from the following formula:
BondingDiscount=rDPXLPBondingDiscountsqrt(rDPXTreasuryReserves)Bonding Discount =rDPX LP Bonding Discount * sqrt(rDPX Treasury Reserves)
rDPXLPBondingDiscount is a constant that is set and changeable via governance within predefined parameters. This allows the size and direction of the bonding discount to be adjusted based on market conditions (where BondingDiscount is negative, bonding is disincentivized since it is cheaper to buy $dpxETH from the open market).
Bonded $rDPX and $ETH become part of the rDPX v2 Treasury's PoL. This PoL will be adjusted via LP Management before being deployed on the rDPX/ETH Permissioned AMM to earn yield to grow the treasury. Additionally, they are treated as $dpxETH's backing and can be redeemed in the event of a significant downward de-peg via our Peg Stability Modules.