For Beginners

FAQ: Sushi Bonds

Everything you need to know about Sushi Bonds

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  1. What is Sushi Bonds?

Sushi Bonds is an economic alternative to traditional liquidity mining, designed to make DeFi more long-term and sustainable. Sushi Bonds allow token holders to buy tokens at a discounted price. Token projects convert bond sales into Protocol Owned Liquidity (POL) by establishing liquidity pools on Sushi for trading, a process optimized by Steer's liquidity management. Consequently, users acquire tokens at lower prices, token projects gain long-term liquidity and trading fees, Sushi increases its Total Value Locked (TVL), and the overall DeFi market benefits from more stable liquidity.

Developed collaboratively by Sushi, Bond Protocol, Steer Protocol, and Serious People, Sushi Bonds leverage the best expertise in DeFi to maximize outcomes. This innovative approach represents a strategic shift in liquidity provision, aiming to create a more resilient and efficient market.

  1. How to purchase Bonds?

Check out this step-by-step tutorial. A video guide will be up soon.

  1. What does the “vesting period” mean for Sushi Bonds?

The vesting period is a predetermined time frame during which your tokens are locked to provide sustained liquidity to the project. Each Sushi Bond comes with a specified vesting period, which can be as short as 7 days. After this period, bonders are able to claim the tokens they have purchased.

  1. What are the choices of quote tokens?

The current options for quote tokens are LP tokens, requiring users to provide liquidity to a specific pool to obtain these LP tokens before participating in bond sales. In the future, we plan to introduce zapping capabilities, enabling bonders to purchase bonds directly with major cryptocurrencies such as ETH and USDC. Sushi will then handle the conversion to LP tokens on behalf of the users.

  1. What is a positive and negative discount? 

Positive discount refers to buying tokens below market price, while negative discount involves purchasing at a price above the market.

  1. Is there a maximum or minimum amount to purchase?

There is no minimum purchase amount, while the maximum bond amount is subject to the available capacity and remaining capacity of the bond market.

  1. What is "Available Capacity" vs "Remaining Capacity"?

Available capacity refers to the maximum amount of tokens currently available for purchase, as the bond market divides the total capacity into multiple chunks released once per day. Meanwhile, remaining capacity is the total amount of tokens still available for purchase.

  1. Are there any fees?

There are no fees for users who purchase Sushi Bonds. 

  1. What is the benefit of Sushi Bonds for token holders?

Communities benefit from discounts on project tokens, which can appreciate in value over time. Projects gain liquidity, and the overall ecosystem benefits from sustained market depth and volume.

  1. Is there any benefit of not withdrawing even after the vesting period is up?

Delaying withdrawal after the vesting period in Sushi Bonds may not directly benefit in terms of price appreciation or ecosystem participation. However, bonders have the option to use their discounted tokens to provide liquidity in pools, thereby maximizing their yields. By contributing these tokens to a liquidity pool, bonders can earn additional returns from trading fees and potentially other incentives, effectively utilizing their tokens to generate further income. This approach allows for the strategic use of discounted tokens to enhance overall investment performance.

  1. What is Protocol Owned Liquidity (POL)?

Protocol Owned Liquidity (POL) is liquidity that is owned and managed by the protocol itself, accumulated through bond sales. This concept is opposed to the context of traditional liquidity mining, in which token projects give out tokens for “rented liquidity," where liquidity providers (LPs) can withdraw their tokens at any time. POL provides permanent, stable, and controllable assets for the protocol, enhancing the reliability of its liquidity base.

Since the protocol owns the liquidity, it's not subject to the whims of external liquidity providers who might withdraw their funds for various reasons (like chasing higher yields elsewhere). This ownership lends greater stability and sustainability to the protocol's liquidity pool.

  1. Who owns the POL in Sushi Bonds?

The POL is managed by Steer's smart pools to maximize the return-on-emissions (ROE) for the bond issuers, which collects quote tokens from Bonders to create and maintain liquidity in trading pools.

During the bonding process, these projects obtain quote tokens from bond sales. They then use these tokens to create POL trading pools on Sushi. This approach allows them to 1) receive sales proceeds, 2) convert these sales into pools to generate trading revenue and earn trading fees themselves, and 3) optimize the pools through liquidity managers, like Steer, to ensure the liquidity remains within the desired range and to maximize yields in trading pools.

  1. Why are Savvy bond tokens ARB instead of SVY?

Bond issuers have the flexibility to choose whichever tokens they prefer to offer, provided these tokens are appealing enough to encourage their community to supply liquidity to their pools. In this scenario, Savvy has received ARB from the Arbitrum Short Term Incentive Program and has opted for Sushi Bonds as a distribution strategy to acquire protocol owned liquidity (POL) for their SVY token. 

By aligning with the objectives of the Sushi Bonds program, Savvy aims to secure sustained liquidity that they will own in perpetuity by offering ARB at a discount to acqquire the liquidity. This approach is designed to attract its community to LP the SVY/WETH pool, favoring the acquisition of lasting liquidity over merely distributing ARB for short-term liquidity thru more traditional farming approaches. 

This is a good example of how token projects can optimally utilize their grants from incentive programs to more permanently solve their liquidity needs, rather than throwing away tokens on renting programs that do not solve the problem long term. In farming, you DO NOT keep the LPs, so once rewards are gone you are left with nothing, hence the obvious inefficiency of those programs.