Bonds and $DIA mint

Liquid bond sales

Diamonde Bonds are a financial primitive that enables asset trading at fully market-driven prices over a specified time period (typically between the protocol and individual stakeholders). In other words, Diamonde Bonds provide a market-driven pricing mechanism applicable to any two ERC-20 tokens, without relying on third-party solutions such as oracles.

Users can purchase discounted RFV treasury bonds (liquidity bonds/reserve bonds) through the Diamonde platform to obtain DIA. The proportion of treasury minting is determined by the risk-free value. If 1000U reserve bonds are minted, 1000 DIA tokens (1:1) can be minted with anchoring value. Liquidity bonds are minted with DIA based on the risk-free value (1:0.45) ratio of the treasury with anchoring value.

Bond mechanics

Bonds are a financial primitive that allow assets to be traded at fully market-driven prices over a specified time period (typically between the protocol and individual stakeholders). The bond pricing mechanism is determined by a modified Dutch auction, known as a Sequential Dutch Auction (SDA), which is entirely driven by market participants without relying on oracles.

Purchasing a bond

When purchasing bonds, buyers are required to invest a certain amount of principal upfront and will receive DIA upon maturity. Therefore, the bond's return is uncertain and depends on the price of DIA at the time of maturity.

The payout of a bond is determined by its current discount rate. A positive discount rate indicates that the bond is priced below the market value, while a negative discount rate signifies that the bond is priced above the market value.

The variable discount rate serves as the bond market’s mechanism for internally regulating its supply in response to demand. This ensures that the bond market’s supply is sold within the specified time period.

Types of Diamonde bonds

Reserve Bonds

Reserve bonds are bonds sold at a discounted price to acquire treasury reserve assets. These bonds serve a dual purpose: not only do they help stabilize the price of DIA during bullish market conditions, but they also accumulate profits from these bonds as treasury reserves. These accumulated reserves can then be utilized to stabilize prices during bearish market conditions through the use of reverse bonds.

Inverse Bonds

Reverse bonds are bonds that sell reserve assets (typically USD stablecoins) in exchange for DIA (the reverse of reserve bonds). Like reserve bonds, these bonds are used to stabilize the price of DIA. However, unlike reserve bonds, they can be redeemed immediately, serving as a core mechanism for absorbing market sell pressure.

Liquidity Bonds

Liquidity Bonds are similar to Reserve Bonds, except that they bond in Liquidity Provider (LP) tokens issued by an AMM. These bonds are used when there is a need to accumulate more liquidity.

DIA Bonds

DIA bonds are bonds that sell DIA in exchange for DIA. Their purpose is to transform dDIA staking, which is permanent and fully liquid, into a time-locked, semi-liquid form of staking.

For more information about Diamonde Bonds, refer to the whitepaper: "Creating a Liquid Interest Rate Market with Diamonde Bonds."

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