KlimaDAO is making inverse bonds available in order to demonstrate that the protocol is prepared to stand behind the backing value of KLIMA even during challenging periods. For a deep dive on the intention of inverse bonds, check out this explainer.
Why would a KLIMA holder want to carry out inverse bonding?
Similar to regular (i.e. external) bonds, discounts on inverse bonds are dynamic and set by the market. In periods of positive discounts, you receive a higher discount when you bond rather than normal trading.
As an example, instead of trading in the KLIMA/USDC pool, suffering slippage and trading fees, a KLIMA holder who is looking to exit could exchange KLIMA directly with the protocol for USDC at a dynamic discount rate dictated by capacity and demand (for example, assuming 100 KLIMA trades for 550 USDC on SushiSwap, 100 KLIMA bonds for 561 USDC via inverse bonding, providing a 2% discount).
How can I inverse bond KLIMA for USDC?
1) On the KlimaDAO bonding page, select ‘KLIMA (inverse)’
2) On the bonding dashboard, enter the amount of KLIMA you wish to bond. The dashboard will reflect how much USDC you can expect to receive based on the amount of KLIMA entered.
3) Approve the bonding transaction by clicking on ‘Approve …’
Note: You will only have to do this the first time you approve a transaction for an inverse bond. This is not the actual transaction for bonding.
4) Execute the bonding transaction by clicking on ‘Confirm’. Congratulations, you have successfully bonded KLIMA for USDC!
Note: Unlike regular bonds, there is no vesting period for USDC inverse bonds and therefore settlement is instant.
Explainers for terms found on the inverse bonding dashboard
Premium: The difference in the amount you receive via inverse bonding as compared to swapping KLIMA in the open market.
Capacity: The total amount of USDC available in the inverse bond contract.
Maximum: The maximum amount of USDC you can acquire if you bond at this instant.
What should I look out for?
If the premium is negative, bonding is not profitable at the current time.
Stay up to date
As the Policy Team will be monitoring the impact of the current inverse bonding experiment and subsequently publishing an analysis of its effectiveness, look out for first-hand updates that will be published across our social platforms.
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