BMIP 010: BBOND Bonus Redemption Adjustment
The following proposal is to provide investors with a much larger incentive to purchase BBOND’s by lowering the peg required to receive the redemption bonus.
Current peg for BBOND redemption bonus = 1.10
Proposed peg for BBOND redemption bonus = 1.05
What does this mean?
At the moment, we require peg to reach 1.10 to be able to qualify for the redemption bonus. Many of our investors, and other protocol investors, feel that this threshold is too high and isn’t appealing as an investment so they are not utilized as much as they should be. Many investors would rather be farming away in the BOMB/BTCB pools for their constant returns instead. If you aren’t familiar with BBOND’s, please see here to learn in more detail!
How will this help the BOMB protocol?
By taking BOMB off the market and converting them to BBOND’s, this decreases the supply of BOMB whilst also driving up the price. If we can make BBOND’s more attractive to all our investors, maintaining peg will be a breeze as purchasing BOMB, then converting to BBOND’s, is the most effective way to regain peg. By lowering the threshold we expect to see BBOND usage increase by a substantial amount. Why you ask? The upside of BBOND’s is amazing plus it’s the best way to support the protocol!
To help visualize this upside more clearly, let’s look at two examples.
Example 1: 0.85 peg/$2.50 1.05 peg/$3.00
- You buy 1000 BOMB for $2500 at 0.85 peg, hold, then sell them all at 1.05 peg. You will have $3000 with $500 profit.
- You burn 1000 BOMB ($2500 worth) for BBOND’s at 0.85 peg, then redeem at 1.05 peg for a redemption bonus. When you claim you will receive 1035 BOMB, giving you $3105 with $605 profit. (For the maths behind this, please see here.)
Example 2: 0.85 peg/$2.50 1.10 peg $3.10
- You buy 1000 BOMB for $2500 at 0.85 peg, hold, then sell them all at 1.10 peg. You profit $0.60 x 1000 = $600.
- You burn 1000 BOMB ($2500 worth) for BBOND’s at 0.85 peg, then redeem at 1.10 peg for a redemption bonus. When you claim you will receive 1070 BOMB, giving you $3317 with $817 profit.
It’s important to note, the higher above peg we go the redemption bonus gets more lucrative!
Are there any downsides?
After a long discussion, Aaron and I came up with no downsides to this proposal. The aim for BOMB is to stay pegged to BTC, not stay well above peg (over 1.05) for extended periods of time. This leads to an overinflation of BOMB tokens which, if we’re not careful, can then lead to bigger sell offs. This proposal, combined with our new small print TWAP of 1.001, should lead to BOMB fluctuating from around 1.00 peg to 1.05, a very healthy place to be for sustainable, manageable protocol growth.
We strongly believe that combining this proposal with our loyal BOMBSQUAD community, we will be able to sustain peg with a lot more ease. This gives all of our users another investment option which also greatly benefits the protocol in many ways!
As promised, we will allow 24 hours for discussion and then another 24 hours for voting. Once these stages are complete, the change will be actioned in 24 hours if approved (new time lock is now live!).