Derify Bond and Bond Token
In the previous article “How does the insurance pool in Derify work”, we elaborated the mechanism of the insurance pool and mentioned that the insurance pool may also face the risk of a deficit in extreme market conditions. Traditional exchanges usually deal with the situation by a “loss distribution” mechanism, essentially distributed loss among users, typically, by reducing profitable positions in a certain order, leads to a poor user experience. Differently, Derify improves the user experience by issuing redeemable bonds.
Bond Token bDRF and Issuance Conditions
As shown in the chart of the insurance article, bond tokens are automatically issued when there are no funds left in the insurance pool. bDRF, Derify’s bond token, is a stable coin with a 1:1 peg to BUSD and automatically issued by the system. All outstanding payments of BUSD that Derify’s insurance pool can’t pay off are paid with an equal amount of bDRF tokens, ensuring that no system loss is shared by users, and users always gets paid. bDRF is a type of token with unlimited issuance, unlimited redemption and unlimited burning.
Utilities of bDRF
After receiving bDRF tokens, users can use these bDRF tokens according to their own needs：
1. Trading in Secondary Market
bDRF can be traded directly through Uniswap or other DEXs/CEXs for circulation, and users can sell the obtained bDRF tokens through trading platforms to get USDT and other stable coins.
2. Provide liquidity for bDRF.
You can use bDRF to provide liquidity on DEX.
3. Staking bDRF to get rewards.
The Derify Protocol provides bDRF staking service, and users can stake bDRF to get interest.
3. Providing liquidity for bDRF transactions
bDRF can also be used for providing liquidity and liquidity mining on other DEXs.
4. Redeem for BUSD
When there is an overflow in the insurance pool, the overflowed funds can be used to redeem the bond token bDRF, and then the bDRF will be burned. When the redemption fund is available, users can always exchange bDRF tokens for BUSD at a ratio of 1:1.
5. Use bDRF as Margin in derivative trading or mining (not available now)
When multi-collateral function is available, users can directly use bDRF tokens as BUSD at a ratio of 1:1. These bDRF tokens can be used as margin for perpetual trading or position mining.
With Derify unique risk control mechanism, bonds will only be issued when extreme market condition occurred and the insurance pool is lack of funds. When the market stabilizes again, the insurance pool will start to receive funds again and the bond issuance will cease. Therefore, the bDRF issuance is a rare event.
Derify incentive mechanism (staking and LP mining) and redemption mechanism can bring stable trading liquidity and price stability to bDRFs (arbitrage opportunities will appear when the bDRF price is below 1 BUSD). Thus, the bond mechanism can still be stable under extreme market condition(s), which is vital as it will be Derify’s last risk control layer.
Important Links & Docs:
Audit Report: https://www.certik.com/projects/derify-protocol
Website: https://derify.finance/
Whitepaper: https://docs.derify.finance/whitepaper/introduction
Tokenomics: https://docs.derify.finance/whitepaper/tokenomics
Twitter: https://twitter.com/DerifyProtocol
Github: https://github.com/derivationlab
Telegram: https://t.me/derifyprotocol_official
Discord: https://discord.com/invite/kSR6tz2pdm
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