Bonds
What are Bonds (ICE)?
ICEs are unique tokens that can be utilized to help stabilize SNOW price around peg (1 SNOW = 1 JOE) by reducing the circulating supply of SNOW if the TWAP (time-weighted-average-price) goes below peg.
When can I buy ICE?
ICE can be purchased only on contraction periods, when TWAP of SNOW is below 1.
Every new epoch on contraction periods, ICEs are issued in the amount of 3% of current SNOW circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of SNOW, no more bonds will be issued.
Note: ICE TWAP (time-weighted average price) is based on SNOW price TWAP from the previous epoch as it ends. This means that SNOW TWAP is real-time and SNOW TWAP is not.
Where can I buy ICE?
You can buy ICEs if any are available, through Bonds page, anyone can buy as many bonds as they want as long as they have enough SNOW to pay for them.
There is a limit amount (3% of SNOW current circulating supply) of available ICE per epoch while on contraction periods, and are sold as first come first serve.
Why should I buy ICE ?
The first and most important reason is Bonds help maintain the peg, but will not be the only measure used to keep the protocol on track. We also have a COMMUNITY fund that will step in and buy SNOW to get it back to peg.
ICE don't have an expiration date, so you can view them as an investment on the protocol, because longterm you get benefits from holding bonds
Incentives for holding ICE
The idea is to reward ICE buyers for helping the protocol, while also protecting the protocol from being manipulated from big players.
So after you buy ICE using SNOW, you get 2 possible ways to get your SNOW back:
Sell back your ICE for SNOW while peg is between 1 - 1.1 (1 SNOW= 1 JOE) with no redemption bonus. This is to prevent instant dump after peg is recovered
Sell back your ICE for SNOW while peg is above 1.1 (1 SNOW= 1 JOE) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from ICE.
Example:
When SNOW = 0.8, burn 1 SNOW to get 1 ICE (ICE price = 0.8)
When SNOW= 1.15, redeem 1 ICE to get 1.105 SNOW (ICEprice = 1.27)
So, which one is better?
If I buy SNOW at 0.8, and hold it until 1.15 and then sell, I'm getting +0.35$ per SNOW
But, if I buy SNOW at 0.8, burn it for ICE, and redeem it at 1.15, I'm getting 1.105 SNOW * 1.15 (SNOW current price) = 1,271 (+0.47$) per ICE redeemed.
But what if getting back to peg is taking too long?
We are going to adjust our use cases, to have different behaviors on contraction and expansion periods to benefit SNOW and ICE holders when needed.
When can I swap ICE for a bonus?
ICE TWAP (time-weighted average price) is based on SNOW price TWAP from the previous epoch as it ends. This means that SNOW TWAP is real-time and ICE TWAP is not. In other words, you can redeem ICE for a bonus when the previous epoch's TWAP > 1.1
Mechanism
ICE (bond tokens) are available for purchase when SNOW falls below the peg. If SNOW TWAP is between 1.00 and 1.01, neither ICE nor SNOW will be issued.
e.g. if SNOW TWAP < 1, exchange SNOW for ICE will be in a 1:1 ratio.
ICE (bond tokens) are available for redemption when SNOW goes above the 1 JOE peg.
To encourage the redemption of ICE for SNOW when SNOWs TWAP > 1.1 and incentivize users to redeem at a higher price, ICE redemption will be more profitable with a higher SNOW TWAP value, of which ICE to SNOW ratio will be 1:R, where R can be calculated in the formula as shown below:
R=1+[(SNOW(twapprice)−1)∗coeff)]
Where coeff = 0.7
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