Kalmy.APP - Bonds as tool to mitigate LP rewards inflation
The upcoming KalmySwap update has now been successfully tested on three chains: BNB Chain, Fantom, and Avalanche. We are now finishing up the tests of new pools.
With the upcoming introduction of the first public KalmySwap (AMM hybrid aggregator), Kalmy.APP ecosystem will as well be getting its own version of bonds. This feature will be publicly released together with KalmySwap in one update.
Why bonds?
Traditionally, DeFi protocols attract liquidity with heavy protocol native token rewards. We in KALM believe in taking slower by protecting the core token's value. This would allow us to incentivize more products within the ecosystem sustainably for longer timeframes .
To see how we plan to loop incentives to infinity, read this.
Bonds on Kalmy.APP would be a counter-inflation tool that would constantly contribute to the liquidity of the core asset - KALM. Due to the release of the bonds, we would be able to create LPs with lower rewards for community-owned pools, contributing to significantly less selling pressure.
Meanwhile, we would still be able to grow our liquidity as well as create more burns and solidify the treasury for further ecosystem growth.
How do these bonds work?
We play it quite simple.
In the upcoming update, you will be able to deposit KALM liquidity within the following pools:
BNB Chain
- KALM-BNB
- KALM-BUSD
Avalanche C-Chain
- KALM-AVAX
- KALM-USDC
Fantom
- KALM-FTM
- KALM-USDC
All the native pools and 3rd party liquidity will be combined into the KalmySwap hybrid aggregator liquidity on three different chains.
User's LP tokens can be used to purchase a limited amount of discounted KALM tokens (vs. real-time market price). This token is then being vested for a time period of several days while liquidity is being transferred to the protocol.
The number of bonds a day is limited; all the unpurchased bonds are sent to a burn address. This creates a win-win scenario where either KALM liquidity is growing or the maximum supply of token decreases.
Numbers (Bonds specifications)
70% of the liquidity obtained as the result of bonds purchases will remain as KALM liquidity owned by the treasury. The other 30% will be managed by the team.
Most of the KALM from received LP tokens will be re-injected into mining rewards, adding to the KALM reserves (aimed to loop the ecosystem rewarding to infinity). No KALM to be sold from this; however, there might be burns depending on this tokenomics performance.
The rest of the LP assets (BNB, AVAX, FTM, USDC) will be pretty much traditional treasury management. This will include various activities, from investments and KALM buybacks to promoting and maintaining Kalmy.APP ecosystem. All the addresses are to be public.
The bonds amount for sale: starting 1000 KALM/day; if all bonds for a day are sold -> +500 KALM available on the next day.
Max limit is 5000 KALM/day; min limit is 500 KALM; all unsold KALM bonds to be sent to burn address.
The length of a bond will be fixed at five days; this parameter is subject to an initial core team review.
A maximum discount of a bond vs. market price is fixed to be 8%; there will be an initial core team review of this parameter as well.
LP staking rewards: 150k KALM/year for each chain (675k = 450k total); we have reserved 325k extra KALM for bonus mining periods in year 1.
Multi-chain kickstart deposit: 500k KALM.
KALM staking emissions are to be reduced by 20%.
Yield leverage emissions: all related are to be reduced by 10%.
Could the parameters be changed after the initial review?
Yes, this is a very experimental feature, and we would closely monitor the first days together with the community. Until Kalmy.APP is transitioned to DAO, it is fair to expect adjustments based on the tokenomics performance and community discussions.
Why would I not sell discounted bonds right after unlock? Wouldn't this become a race to sell ASAP?
You have every right to do so, and, in fact, we do want people to sell unlocked KALM from the bonds vest.
The treasury is growing this way, yet the price action is always taking place on higher KALM liquidity.
When a user purchases a bond, KALM's liquidity is automatically growing larger, meaning any arbitrage attempt will contribute to future trades happening on a much larger liquidity pool; therefore, each trade's price impact and slippage reduce in size.
After enough bonds have been sold, liquidity is expected to grow large enough that market arbitrage by bonds' buyers will have little to no impact on KALM's price.
Is there any form of price backing for the KALM price?
No; a part of 30% from bonds sales will be occasionally bought back from the market, contributing to the buybacks using other ecosystem's products fees meanwhile. The KALM supply is as well inelastic (fixed), and the burning processes are not negatively affected in any way.
The reasoning is simple - treasury price backing creates a price expectation anchor, so we will just perform irregular buybacks independent from KALM market price until a better solution is found. The buybacks will not be announced in advance.
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