Dollar-pegged stable coins have become an essential part of crypto due to their lack of volatility as compared to tokens such as Bitcoin and Ether. Users are comfortable with transacting using stable coins knowing that they hold the same amount of purchasing power today vs. tomorrow. But this is a fallacy. The dollar is controlled by the US government and the Federal Reserve. This means a depreciation of dollar also means a depreciation of these stable coins.
BondToEarn aims to solve this by creating a non-pegged stable coin called BTE. By focusing on supply growth rather than price appreciation, BondToEarn hopes that BTE can function as a currency that is able to hold its purchasing power regardless of market volatility.
Is BTE a stablecoin?
No, BTE is not a stable coin. Rather, BTE aspires to become an algorithmic reserve currency backed by other decentralized assets. Similar to the idea of the gold standard, BTE provides free-floating value its users can always fall back on, simply because of the fractional treasury reserves BTE draws its intrinsic value from.
BTE is backed, not pegged.
Each BTE is backed by 1 BUSD, not pegged to it. Because the treasury backs every BTE with at least 1 BUSD, the protocol would buy back and burn BTE when it trades below 1 BUSD. This has the effect of pushing BTE price back up to 1 BUSD. BTE could always trade above 1 BUSD because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1.
You might say that the BTE floor price or intrinsic value is 1 BUSD. We believe that the actual price will always be 1 BUSD + premium, but in the end that is up to the market to decide.
How does it work?
At a high level, BondToEarn consists of its protocol managed treasury, protocol owned liquidity, bond mechanism, and high staking rewards that are designed to control supply expansion.
Bonding generates profit for the protocol, and the treasury uses the profit to mint BTE and distribute them to stakers. With LP bond, the protocol is able to accumulate liquidity to ensure the system stability.
Why is PCV important?
As the protocol controls the funds in its treasury, BTE can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 BTE with 1 BUSD. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy BTE below 1 BUSD with the treasury assets until no one is left to sell. You can't trust the FED but you can trust the code.
As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer term because more funds are available in the treasury.
Why is the market price of BTE so volatile?
It is extremely important to understand how early in development the BondToEarn protocol is. A large amount of discussion has centered around the current price and expected a stable value moving forward. The reality is that these characteristics are not yet determined. The network is currently tuned for expansion of BTE supply, which when paired with the staking, bonding, and yield mechanics of BondToEarn, result in a fair amount of volatility.
BTE could trade at a very high price because the market is ready to pay a hefty premium to capture a percentage of the current market capitalization. However, the price of BTE could also drop to a large degree if the market sentiment turns bearish. We would expect significant price volatility during our growth phase so please do your own research whether this project suits your goals.
What is the point of buying it now when BTE trades at a very high premium?
When you buy and stake BTE, you capture a percentage of the supply (market cap) which will remain close to a constant. This is because your staked BTE balance also increases along with the circulating supply. The implication is that if you buy BTE when the market cap is low, you would be capturing a larger percentage of the market cap.
What is a rebase?
Rebase is a mechanism by which your staked BTE balance increases automatically. When new BTE are minted by the protocol, a large portion of it goes to the stakers. Because stakers only see staked BTE balance instead of BTE the protocol utilizes the rebase mechanism to increase the staked BTE balance so that 1 staked BTE is always redeemable for 1 BTE.
What is reward yield?
Reward yield is the percentage by which your staked BTE balance increases on the next epoch. It is also known as rebase rate. You can find this number on the BondToEarn staking page.
What is APY?
APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of BondToEarn, your staked BTE represents your principal, and the compound interest is added periodically on every epoch thanks to the rebase mechanism.
One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 BTE on day 1, after a year, your balance will grow to about 1377.
Why does the price of BTE become irrelevant in long term?
As illustrated above, your BTE balance will grow exponentially over time thanks to the power of compounding. Let's say you buy a BTE for $100 now and the market decides that in 1 year time, the intrinsic value of BTE will be $2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1377 BTE by the end of the year, which is worth around $2754. That is a cool $2654 profit! By now, you should understand that you are paying a premium for BTE now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your BTE balance to grow exponentially and make this a worthwhile investment.
What will be BTE intrinsic value in the future?
There is no clear answer for this, but the intrinsic value can be determined by the treasury performance. For example, if the treasury could guarantee to back every BTE with 2 BUSD, the intrinsic value will be 2 BUSD. It can also be decided by the future DAO. For example, if the DAO decides to raise the price floor of BTE, its intrinsic value will rise accordingly.
How does the protocol manage to maintain the high staking APY?
Let’s say the protocol targets an APY of 100,000%. This would translate to a rebase rate of about 0.6328%, or a daily growth of about 2%.
If there are 100,000 BTE tokens staked right now, the protocol would need to mint an additional 2000 BTE to achieve this daily growth. This is achievable if the protocol can bring in at least 2000 BUSD daily from bond sales. If the protocol fails to achieve this, the APY of 100,000% cannot be guaranteed.
Do I have to un-stake and stake BTE on every epoch to get my rebase rewards?
No. Once you have staked BTE with BondToEarn, your staked BTE balance will auto-compound on every epoch. That increase in balance represents your rebase rewards.
Is BondToEarn Audited?
BondToEarn is currently unaudited! It is a fork of Olympus DAO on the BSC Network, audits will occur at a later stage. Stay cautious!