Bonding Management

Sacred tokens will be bonded in order to increase liquidity. Bonding will be done gradually over several months, aiming to keep slippage in AMMs low for the majority of traders. A bonding simulation is shown below.

WIP Bonding Simulation: https://docs.google.com/spreadsheets/d/1rSWeuYiWd6WpFsfjxRtQSdWb0gkWrcq8dkCelR0hk0U/edit#gid=0

The key things to consider are:

1. Target POL desired

   Since POL does not generate large returns in relation to how much is spent to acquire it, Sacred should aim to have the amount needed to maintain sufficient liquidity. Low liquidity makes price discovery difficult and can cause trading to stagnate due to high slippage. Sufficient liquidity allows discovery and reduces volatility. Higher liquidity than required does not confer any advantages.

2. Purchasing POL at the lowest possible price for Sacred

   This means monitoring and managing the bond price so that the discount is just enough to attract buyers, but not lower.

3. Gains from bonding should not compete with those from incognito mining.

   Since incognito mining is the main product, the profit from bonding should be lower, so that only users looking for short term gains participate.

Policy

1. Target POL Desired

There should be enough liquidity so that slippage is reasonable for large buys (5 figure trades). A target liquidity of USD $250K - $300K is sufficient to accomplish this. This is also close to Tornado Cash’s current liquidity.

Once we reach this amount, we can stop bonding and monitor the volumes / slippage and adjust if necessary.

2. Initial Pool Size

The starting size of the pool should be as close as possible to our Target POL.

This creates better price stability from the start and reduces the amount of bonds we need to sell.

3. Weekly Emission Rates

The rates emitted should not exceed those in this document.

4. Handling discounts for bonds

An initial sizable MAX discount should be provided. We can compare it with the Olympus Marketplace and provide a competitive value to start with. The BCV should be set to 2% of the current token price. The MAX discount should continue to be reduced to a level where traders are still purchasing the bonds. Ideally, this optimized discount will be at a level that incentivizes short term traders, while long term traders use incognito mining.

5. Monitoring

We need to monitor:

1. Volumes being traded and continue to test to make sure the slippage for 80% of the trades is under 6%. This mitigates the risk of trading stagnation.

2. The daily price of SACRED compared to the MAX discount for the bonds. The discount and BCV needs to be adjusted if the SACRED’s price rises too quickly. This mitigates the risk of giving out bonds too cheaply for more than 48 hours.

Monitoring should be set up with DataDog and PagerDuty to ensure fast response times and guaranteed signals.