Bonds refer to the process of trading Liquidity Provider (LP) tokens for GYRO tokens at a discount (below market price).
With Gyro, the process of purchasing bonds has been simplified to a one-step process. Instead of having to purchase the LP tokens then trading them for Bonds, users only need to have the asset-pair (USDT + GYRO) in their wallet to purchase the bonds directly.
Bonds are vested for 5 days and are paid out per block height. For example, if you were to purchase a bond, after the first day you would have received 20% of the vested amount; then 40% after the second day, etc.
Simply, it allows you to buy GYRO at a lower cost basis. In return for selling your asset-pair (LP), the protocol will sell you GYRO at a discount. The idea here is that bonds will give you some amount more GYRO than you would have received if you had bought on the market and then staked. The amount of “how much more” will be determined by how many bonds there are already available.
Let’s walk through a bond example.
1. When the price of GYRO is $500, and you have $1,000USD. With that cash amount money, you are able to go and buy 2 GYRO and stake.
2. Staking will yield ~0.6% per epoch, and so during a vesting term (15 epochs), your stake will increase from 2 GYRO to 2.185 GYRO.
3. If the bond price is $450, instead of buying outright, you could buy 1 GYRO for $500, add 1 GYRO and $500 to the pool, and bond the liquidity share you got back for a locked in 2.22 GYRO.
4. Over the next five days, you can claim those GYROs as they vest, until term completion and you have the full amount.
5. Strategy gets interesting when you factor in the rewards from the bond!
6. Before the end of each epoch, you could claim the accrued rewards and stake, which means you get both the discount and the staking rewards.
7. Or else you could, at the end of the term, add the 2.22 GYRO plus $1110 to the pool to get new LPs and create another bond.
8. Doing this will lower costs because you already got your GYRO at a discount and you’re now getting yet another discount on the next round.
9. In this strategy you can do both:
1. Claim rewards and stake before the end of each epoch,
2. Then when you’re done vesting, unstake everything and rebond!
Creating a Bond
Go to Gyro’s website and select the ‘Bond’ tab. The protocol will quote the GYRO amount and a vesting period for the trade. You would need to have the asset-pair (USDT + GYRO) in your wallet to purchase the bond.
Redeeming a Bond
On Gyro’s website, select the ‘Bond’ tab, then click on the submenu ‘Redeem’. The protocol will recall when you bonded and your vesting term. If you have any pending rewards, you can claim them. Rewards accrue throughout the vesting period.
Note: sGYRO is the protocol’s profit accruing token and since bonders earn GYRO (not sGYRO), stakers earn 100% of protocol profits (minus the DAO’s cut). See our staking article for more info.
Some key points on Bonding
Bonds give you the opportunity to buy GYRO from the protocol at a discount. Here are just a few differences to keep in mind:
1. You pay for GYRO with liquidity. This aspect helps the protocol accumulate liquidity shares.
2. NO GYRO up front. Instead, your GYRO is vested over the course of five days. This smooths out market impacts from the new supply of GYRO.
3. The demand for bonds will determine your discount. The bond discounts increase when there are more bonds, and decreases when there are less.
4. Once you bond, your LP commitment is locked. When you have executed a trade, you have made the trade. Think of it as buying GYRO and committing to stake for 5 days with a set reward rate.
Bonding not only allows users to purchase GYRO at discount, but can also be used as part of a multi-step investment strategy to compound yields.