Bonds arrive in crypto with Ethernity Cloud
Major innovation in the crypto ecosystem! Ethernity Cloud is introducing bonds, offering a new source of funding for Web3 project holders. For investors, this is a new way to make money through cryptocurrencies. What are they and how do these bonds work? The answer follows.
Reserve Bonds: What are they?
Reserve Bonds are financial instruments designed to provide projects with alternative solutions to generate sustainable liquidity. With these instruments, investors who believe in the project can generate profits by buying tokens at an initial price lower than the market price. The goal of this innovative initiative is to help projects enjoy long-term health by diversifying their sources of funding. The advantage for investors is that the price of these Reserve Bonds varies depending on market conditions and the value of the underlying token.
Reserve Bonds: How do they work?
As soon as a user buys a bond, they receive tokens that they acquire over a certain period, represented in the portfolio by the NFT of the bond. In other words, upon acquiring the bond, they receive tokens incrementally according to a well-defined schedule. They can then claim these tokens as they receive them. The uniqueness of this model is that the price of bonds is proportional to demand and inversely proportional to time elapsed. More clearly, four main factors jointly influence the price of these bonds. These are:
- The entry price of the liquidity provider token;
- The exit token price;
- The time elapsed since the last bond purchase;
- The demand for bonds.
The combination of these four factors allows for establishing a discount on the exit token to ensure the competitiveness of the bonds. Thus, if you buy the token at price P today, you won’t get it tomorrow at the same price. This discount system is at the heart of bond returns.
How does the discount work with bonds on Ethernity Cloud?
Suppose the exit token price increases. If the entry token value decreases or remains unchanged, the bond discount will increase. Indeed, the exit price is higher while the entry token price has decreased or remained the same. With the two values diverging, the discount will be significant.
Now, suppose the exit token price decreases. If the entry token value increases or remains unchanged, the bond will see its discount decrease. This is because the exit token will be acquired with a lower discount, given that it is worth less and the entry token value has increased or remained the same. The discount will be reduced because the two price points converge towards each other.
In the event of a negative discount, it will still be possible to buy bonds and receive the bond NFT. However, the downside is that these exit tokens will have a value higher than the market value.
It should also be noted that the bonds are purchased via single assets. As Ethernity Cloud’s mainnet is on Polygon, where the majority of the project’s community carries out its transactions, this is the MATIC token.
In summary, the reserve bonds introduced by Ethernity Cloud represent a major advancement in the crypto ecosystem. They offer a new path to sustainable financing for web 3 projects, while allowing investors to profit from fluctuations in the cryptocurrency market. This innovative mechanism is based on a combination of factors, including the price of entry and exit tokens, the time elapsed since the last purchase of the bonds, and overall demand. Thus, these bonds contribute to the long-term financial health of projects while providing investors with an opportunity to diversify their portfolios. With the purchase of bonds being conducted through unique assets on the Polygon network, this initiative opens up new perspectives in the realm of decentralized finance.
