Equation Finance is an algorithmic stable coin that is meant to be pegged to the value of 1 $FTM. As the value of the peg is algorithmic, it’s common for the value of $EQU to fluctuate to be both slightly above and slightly below the value of 1 $FTM. When $EQU has a value higher than 1 $FTM, new $EQU is distributed in the Boardroom. When $EQU has a value lower than 1 $FTM, the Boardroom stops distributing $EQU and the Bond is instead open.
$EBOND are creating on each Epoch that the Boardroom operates on whenever 1 $EQU < 1 $FTM (Also called Contraction Phase). During these Epochs, the Bond issue 3% new $EBOND of current circulating $EQU supply. This happens on each Epoch until the Supply of $EBOND is equal to 35% of the circulating supply. In simple terms, $EBOND Circulating Supply < $EQU Circulating Supply during an Epoch shift, then mint 3% new $EBOND. However, $EBOND can only be bought when 1 $EQU < 1 $FTM. $EBOND TWAP is based on $EQU price TWAP from the end of the last Epoch which means that $EQU TWAP is current and $EBOND TWAP isn’t.
Users who help the Equation Protocol to sustain its algorithmic peg to the chain’s native currency should be highly rewarded. There are two ways that $EBOND get’s rewarded which can be chosen depending on personal preference.
While 1 $EQU = 1 $FTM - 1.1 $FTM, you can trade back your $EBOND at a ration of 1 $EBOND = 1 $EQU. Doing this have earned you the difference between buying 1 $EBOND when $EQU was below peg, and the current value of $EQU.
While 1 $EQU >1.1 $FTM, you can trade your $EBOND at a ratio of 1 $EQU = 1 $EQU + BONUS. Doing this have earned you the difference between buying 1 $EBOND when $EQU was below peg, and the current value of $EQU + BONUS.
The BONUS yield for redeeming $EBOND when 1 $EQU is worth 1.1 $FTM or above is calculating using a specific formula. The full redemption value would be: 1+[($EQU(TWAP)−1)0.7)] = $EQU redemption value
Example of $EBOND redemptions You burned 1 $EQU for 1 $EBOND when 1 $EQU was worth 0.87 $FTM. Current value of 1 $EQU = 1.099 $FTM. You exchange 1 $EBOND to 1 $EQU giving you a profit of 0.229 $FTM. You burned 1 $EQU for 1 $EBOND when 1 $EQU was worth 0.87 $FTM. Current value of 1 $EQU = 1.101 $FTM. You exchange 1 $EBOND to 1 $EQU + BONUS giving you a profit of 0,231 + 0,115 = 0,346 $FTM.
These examples illustrate that buying $EBOND when $EQU is below peg and redeeming them when $EQU is above peg could provide a high % profit. Waiting to redeem $EBOND until peg is higher or equal to 1.1 of the peg is extra profitable.
You buy $EBOND at the Bond whenever 1 $EQU < 1 $FTM (according to TWAP) after last Epoch. Each Epoch creates 3% new $EBOND and there is no limit to how many any single wallet can buy. You buy $EBOND with $EQU. The cost of $EBOND is the current value of $EQU. The $EQU that is used to buy $EBOND is then burned, which means that the value of $EQU increases. When $EQU is once again worth over 1 $FTM, the buyer of $EBOND can then trade their $EBOND 1:1 with current value of $EQU.
$EBOND never expires which means that buying $EBONDs is a future investment in the protocol and can be redeemed according to the redemption rules.