This proposal outlines a pilot proposal for the Barnbridge DAO to begin accumulating BOND/ETH liquidity on AMMs. At the time this proposal is written, there is approximately $1.5M in total liquidity for BOND/ETH between Uni ($1.2M) and Sushi ($0.29M) and most of the BOND liquidity is in the BOND/USDC Uni V2 pool ($26.6M). Barnbridge is incentivizing this liquidity over 100 week-long Epochs with 20k BOND emissions per week. 49 out of 100 weeks have been completed.
This proposal is born out of discussions with the team at OlympusDAO and aims to replicate their bond mechanics to offer bonds that sell BOND at a discount in exchange for BOND/ETH LP tokens. As a pilot Barnbridge can contribute 15k BOND towards these bonds for 1 month and assess the impact on liquidity accumulation and token price.
Shift from the initial liquidity mining phase of BOND to reduce the supply per block and enable the DAO to own its own liquidity. Implementing bonds reduces the need for BOND incentives which only create temporary liquidity and persistent sell pressure. Importantly, bonds incentivize active Barnbridge members to participate in the program and help distribute tokens to these users.
For those unfamiliar with the Olympus bond mechanism, the bond contract essentially sells a token (ex: BOND) at a discount in exchange for assets (ex: BOND/ETH LP tokens). Bonds operate by initializing the price for LP tokens above market price and then applying a discount function that decrements price until a bond is purchased, which pushes the bond price back up. This mechanism allows the market to determine the optimal price for bonds. For reference, here is the average discount of OHM bonds with their extremely high APY:
Olympus is offering to provide its expertise in bond contract management to support other DAOs interested in owning their own liquidity. This will include providing the UI for bonds and maintaining bond control variables to balance emissions with liquidity accumulation. In exchange for the implementation and community engagement, Olympus would take 3.3% of all BOND sold and use as backing for OHM. This will align the success of our communities and allow for cross-DAO governance participation.
Barnbridge’s bonds would be offered with a 7-day vesting period to ensure that discount buyers are incentivized to hold their positions. This helps align the goals of bond participants with the goals of the DAO. Bonds will be paid out in BOND in order to save users the gas cost of staking. In addition to purchasing BOND at a discount, bonders know that they are providing permanent liquidity to Barnbridge’s treasury. An additional benefit of bond programs is that they eliminate impermanent loss inherent in traditional liquidity mining and the discount is locked in at the point of purchase.
Proposed Bond Program:
- Accumulate BOND/ETH liquidity on Sushi
- Bond 15k BOND over 4 weeks
- Vesting period: 7 days
- Implementing bonds for BOND/ETH liquidity adds value to the DAO treasury
- Protocol-owned-liquidity allows liquidity incentives to be tapered over time
- Lower BOND emissions in the long-term should improve tokenomics
- Added BOND emissions via bonds in the short-term may cause sell pressure