šµBonds
Purchase BLOW on contraction period to get redemption bonus during expansion phase.
What is BLOW?
When can I swap LOW for BLOW?
BLOW (Lo-fi Bond Token) will only become available for purchase in the Bonds Page following epochs in which the Time Weighted Average Price (TWAP) of LOW is under peg (contraction periods). This means that LOW price will have to be under 1 CRO per LOW for the majority of the previous epoch in order to trigger the Bond to open for purchase. If LOW's TWAP is between 1.00 and 1.01, neither BLOW nor LOW will be issued.
For example, if LOW TWAP < 1, exchange LOW for BLOW will be in a 1:1 ratio.
Every new epoch on contraction periods, BLOW will be issued with minimum of 3% of LOW's current circulating supply and a maximum debt amount of 35%. This means that if BLOW reach 35% of LOW's total circulating supply, no more BLOW will be issued.
BLOW TWAP (time-weighted average price) is based on LOW price TWAP from the previous epoch as it ends which means that LOW TWAP is real-time, BLOW TWAP is not.
The Bond will always open at the very beginning of a new epoch and remain open for the entire epoch. The Bond can not and will never open mid-epoch and during epochs in which the Bond is open, LOW will not be printed in Boardroom.
Where can I buy BLOW?
You can buy BLOW (if any), on the Bonds Page. Anyone can buy as many BLOW as they want as long as they have enough LOW to exchange for.
There is a limit amount (3% of LOW's current circulating supply) of available BLOW per epoch while on contraction periods and BLOW is sold on first-come-first-serve basis.
What is the formula to calculate the redemption bonus for BLOW?
To encourage redemption of BLOW for LOW when LOW's TWAP > 1.1, and in order to incentivize users to redeem at a higher price, BLOW redemption will be more profitable with a higher LOW TWAP value. BLOW to LOW ratio will be 1:R, where R can be calculated in the formula as shown below:
To further illustrate why the longer you hold BLOW the more profitable it is.
Let's take an initial $1,000 investment into consideration. In this example, let's say this $1,000 is used to buy LOW when LOW TWAP is 0.95 and then swapped for BLOW. If these BLOW are redeemed when: -LOW TWAP is 1.5, your investment would now be worth $1,421. -LOW TWAP is 2, your investment would now be worth $1,789. -LOW TWAP is 3, your investment would now be worth $2,526. -LOW TWAP is 5, your investment would now be worth $4,000.
When can I swap BLOW back to LOW?
You can swap it back again when the following 2 conditions are met:
1: LOW TWAP is above the peg (>1.1); AND
2. There is enough LOW in the Treasury to cover the redemption.
Is BLOW right for me? Why?
First, the most important reason is that buying BLOW helps maintain the peg but it will not be the only measure used to keep the protocol on track.
Like anything else in crypto, obtaining BLOW is not risk-free. Just like in the real world, you are purchasing debt from the protocol with the expectation that you will be redeemed at a premium in the future.
To date, this has occurred after all contractions, but past performance does not guarantee the same future outcomes. BLOW does not have an expiration date on redemption, hence, it is ideal for those with a medium to long-term time preference as it ā incentivizes hodlers in exchange for potentially extremely lucrative rewards. If you are looking for a quick flip or have short-term time preference, BLOW may not be the right investment option for you.
Incentives for holding BLOW:
The incentive is to reward BLOW buyers for helping and protecting the protocol from being manipulated by whales.
So after investors buy BLOW using LOW, there are 2 possible ways to get LOW back:
Sell back BLOW for LOW while peg is between 1 - 1.1 CRO with no redemption bonus. This is to prevent instant dump of LOW after peg is recovered
Sell back BLOW for LOW while peg is above 1.1 CRO at premiums
The longer you hold, the more both the protocol and you benefit from BLOW.
For Example:
Scenario 1 : When LOW = $0.8, burn 1 LOW to get 1 BLOW (BLOW price = $0.8 x 1 = $0.8)
Scenario 2 : When LOW TWAP = $1.15, redeem 1 BLOW to get 1.105 LOW (BLOW price = $1.15 x 1.105 = $1.27)
So, which one is better?
If investors buy LOW at $0.8, hold it until LOW = $1.15 and sell, there will be an incentive of $0.35 ($1.15 - $0.8) per LOW.
But if investors buy LOW at $0.8, burn it for 1 BLOW and redeem 1.105 LOW at $1.15, there will be an incentive of $0.47 ((1.105 x $1.15) - $0.8) per LOW.
So, now, you should understand the whole point of buying BLOW.
What if getting back to peg is taking too long?
No worries. We are adjusting our use cases in order to have different behaviors on contraction and expansion periods to benefit LOW and BLOW hodlers when needed.
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