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Bond stabilization
Among the fourth-generation algorithmic stablecoins, bond tokens are designed to cushion the price fluctuations of stablecoins. In QSD, we studied this design idea and introduced two bond tokens, which are the following tokens: one is the bond token CBT released in redemption and recollateralization and the other one is the special bond DBQ activated when the price of QSD significantly deviates from the target value.
CBT
The scenarios and algorithms of CBT (CEC buffering token) have been introduced in the QSD redemption and recollateralization section. Here we will analyze the purpose of this design.
The goal pursued by QSD is the continuous growth of QSD issuance and the intrinsic value of CEC. For this goal, the system will set up a mitigation mechanism for the CEC minted at the time of redemption and recollateralization in the early stage of the system to avoid large fluctuations in the price of CEC tokens. Specifically, when redeeming or recollateralizing, the value of CEC tokens in the algorithm part will be converted to CBT. When certain conditions are met, users can convert CBT to CEC one-to-one.
If no one provides collateral when recollateralization is needed, it will easily cause QSD to break into a "death cycling". In the fractional algorithmic synthetic asset system, when collateral needs to be added, it is often accompanied by a decline in the CEC price and the QSD price below the target price. The additional issuance of CEC tokens during the recollateralization process will undoubtedly intensify the decline in its price. It is very risky if all the stability recovery is pinned on the assumption that the CEC market price can sustain by the market itself. Therefore, the Chemix Ecosystem development team proposes to release the buffering token CBT during the recollateralization process instead of directly releasing CEC.
The CBT minted in redemption and recollateralization cannot be redeemed to CEC immediately. Users can convert CBT tokens to CEC when the system has surplus, that is, in the state of buyback and QSD price exceeds the target. Through this mitigation mechanism, users' worries about the loss of their own equity caused by the short-term large-scale release and dumping of CEC are eliminated. CBT is actually the regulator of CEC token price.
DBQ
When the market price of QSD is lower than $1 to an extent, to establish the price stability of QSD and obtain future profits when redeeming, users can buy QSD stable bond token DBQ with QSD at a discount. Each DBQ bond token can be exchanged back into 1 QSD when the exchange conditions are met in the future. When DBQ bonds are purchased, the QSD will be burned and exit from circulation, so as to reduce the circulation quantity of QSD and promote the price of QSD return to the target value.
DBQ bonds have no interest and no vanished time. Only if the price of QSD is greater than $1, they can be converted into QSD at a ratio of 1:1. This design can prevent bondholders from suffering losses in the process of redemption.
In order to encourage users to actively buy bonds when the QSD discount is large, the system will set a certain discount to encourage users to buy DBQ bonds. At the beginning of the launch of Chemix, the price of DBQ will be set to the third power of the QSD market price. After the market price of QSD exceeds $1.001/QSD, users can redeem QSD from DBQ bond tokens. The user's income in DBQ bond can be calculated as follows:
Where:
is the net return that users can get on DBQ bonds;
is the actual USD value of the user's investment in purchasing QSD bonds;
is the price for QSD.
Example F
The market price of QSD is $0.93/QSD, and the arbitrager buys DBQ in the market with the equivalent BUSD of $1000, then the net income is:
The actual net income was $243.47, yielding a return of 24.347%.
Last modified 4mo ago