Bonding

This type of bonding has very little to nothing to do with traditional bonds. So forget about those!

Bonding is a way for protocols to acquire liquidity and store it in their own treasury. Protocols sell their own tokens in exchange for another token or liquidity pool token. This is the primary way protocols build Protocol Owned Liquidity.

Protocols often sell their token at a discounted market price to encourage purchasing. A clever person would immediately sell the token for immediate profit. This would create incredible sell pressure on the token and absolutely tank its price. However, protocols have anticipated this and generally require one week locking periods to prevent these mass sales.

Regardless, the protocol issued token will plummet in value because people are buying it just to sell it, vested or not. Protocols often engage in buybacks and aggressive staking rewards for the native token to try and reduce sell pressure.

Source

Scroll to Top