Bonding

Overview of Bonding/Staking/Treasury/AI Agents Adjustment

Conceptual Overview: Bonding allows participants to provide assets (e.g., DAI, USDC) to the protocol's treasury in exchange for MID tokens at a bond price. This price can be above or below $1, resulting in either a premium or a discount. By doing so, bonding:

  • Brings stable collateral into the treasury.

  • Ensures that newly issued MID always aligns with tangible value.

  • Enables the protocol to accumulate premiums when bond prices exceed $1, supporting MID’s intrinsic value and potentially maintaining its price above $1.

Bonding is thus a critical mechanism for controlling MID’s supply, managing asset inflows, and stabilizing or enhancing the token’s baseline value.

Basic Mathematical Representations

  1. Bond Price (( B )): Let ( P_{current} ) be the current MID price and ( P_{target} \approx 1 ) the goal. AI agents use a formula inspired by OlympusDAO models and then apply their own adjustments:

    B=Bbase+α(Ptarget−Pcurrent)B = B_{base} + \alpha (P_{target} - P_{current})

    • If ( B > 1 ), participants pay more than $1 in collateral per MID, generating a premium.

    • If ( B < 1 ), they get a discount, paying less than $1 in collateral per MID.

    The coefficient (\alpha) and any additional parameters (like BCV - Bond Control Variable) are managed by AI agents to maintain equilibrium.

  2. MID Issuance Through Bonding: When a user deposits ( X ) units of a stable asset (e.g., DAI), and the bond price is ( B ):

    MID received=XB\text{MID received} = \frac{X}{B}

    • For ( B = 1.05 ): ( \frac{X}{1.05} ) MID issued, yielding a $0.05 premium per MID to the treasury.

    • For ( B = 0.95 ): ( \frac{X}{0.95} ) MID issued, but the protocol effectively accepts a discount, attracting more stable assets to increase supply of MID.

  3. Treasury and Premium Accumulation: The total premium accumulated from bonding (when ( B > 1 )) can be represented as:

    Total Premium=∑(B−1)×MID issued\text{Total Premium} = \sum (B - 1) \times \text{MID issued}

    This premium strengthens the treasury, allowing the system to support staking rewards and potentially keeping MID’s value above $1.

Bonding Process: Detailed Sequence

Below is a step-by-step outline of the bonding process. This sequence assumes the protocol is running, AI agents are active, and users have stable assets (e.g., DAI) ready. It shows how a user interacts with the system, how the system determines the bond price, how the vesting applies, and how AI agents continuously influence parameters.

Step-by-Step Description

  1. User Decision to Bond:

    • A user observes that bonding currently offers MID at a certain bond price.

    • They check the current bond price ( B ), vesting period (7 days), and whether the bond price is at a discount or premium.

    • The user’s goal: Acquire MID at a potentially advantageous rate, expecting stable or even premium-supported value over time.

  2. User Provides Assets:

    • The user selects an asset (e.g., 1,000 DAI) and initiates the bonding transaction.

    • This transaction is submitted on-chain and sent to the bonding contract.

  3. Bonding Contract Interacts with Treasury & AI Agents:

    • The bonding smart contract consults current protocol parameters.

    • AI agents have already determined a suitable bond price ( B ) based on:

      • Current MID price ( Pcurrent )

      • Debt ratio (how much MID is outstanding vs. treasury value)

      • BCV and other parameters

    • The bond price ( B ) might follow a formula like:

      B=Base Price+(Debt Ratio×BCV)B = \text{Base Price} + (\text{Debt Ratio} \times \text{BCV})

    • AI agents continuously update BCV or fine-tune other inputs so that ( B ) reflects real-time conditions.

  4. Calculating MID Allocation:

    • Once the user’s Stable Coin is received, the contract determines how many MID the user will eventually get.

    • For example, if ( B = 1.05 ) and the user provides 1,000 DAI:

      • The user effectively purchases MID at $1.05 each.

      • They receive ( \frac{1000}{1.05} \approx 952.38 ) MID in total, subject to the vesting schedule.

    • If ( B < 1 ), the user gets more MID than the number of dollars they spent, representing a discount.

    • If ( B = 1 ), it’s a neutral exchange: 1,000 DAI for 1,000 MID over time.

  5. 7-Day Vesting Application:

    • The user’s allocated MID is not instantly claimable.

    • A 7-day vesting period applies, meaning each day a portion of the MID becomes redeemable.

    • This schedule prevents immediate flipping of newly bonded MID into the market, reducing volatility and price shocks.

  6. Redemption Over Time:

    • Each day, the user may claim the unlocked portion of their MID from the contract.

    • After 7 days, the user has full access to all bonded MID.

    • If the price of MID remains stable or above $1 (due to premiums captured by bonding or AI-driven adjustments), the user can hold, stake, or sell their MID at a favorable scenario.

  7. Treasury and Market Impact:

    • The treasury now holds the user’s 1,000 DAI.

    • If the bond price was above $1, a premium was effectively generated, strengthening the treasury’s value per MID.

    • If below $1, the protocol attracted more stable assets at a discount, to inscrease supply of MID.

    • AI agents monitor these changes and may adjust future bond prices, staking APY, or supply parameters based on the new data.

  8. Continuous AI Adjustments:

    • Post-bonding, AI agents re-evaluate conditions:

      • If too much MID is entering circulation, they might increase bond prices or reduce staking APY to prevent oversupply.

      • If price deviates below $1, buy back MID to restore equilibrium.

    • These ongoing loops ensure that bonding remains a dynamic, feedback-driven process, always aiming to keep MID at or above $1 in intrinsic value.

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