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May 3, 2022

ENCTR Bonds - What Are They And How Are They Used?

Tl;dr Bonds are mutual agreements between a user and a protocol to easily acquire the funds it needs for growth. For ENCTR Bonds, you exchange stable coins or liquidity tokens for gENCTR in return.

Bonds are smart contract enforced agreements between a User and a Protocol that allow the Protocol to easily acquire the assets that it needs for growth and stability.

In exchange for assets like stablecoins and liquidity pool (LP) tokens, the user will receive gENCTR tokens for a discount after a short maturity period (usually a few days).

Issuing Bonds benefits the entire ecosystem in two main ways depending on the type of Bond that is issued:

  1. Purchasing a stablecoin bond (e.g. DAI) allows the Protocol to grow the size of its Treasury which is used to back the ENCTR tokens that are issued by the protocol. The smart contracts ensure that for every ENCTR token that exists, there is at least one stablecoin in the Treasury. Therefore, the price of ENCTR has a theoretical floor of $1 and as the size of the Treasury increases, the more staked ENCTR we can reward with high APYs (more on staking in a future post).
  2. Purchasing a LP token bond (e.g ENCTR-DAI) allows the Protocol to control its own liquidity and ensure that the ENCTR DEX markets remain liquid enough so that anyone who wants to buy and sell can do so easily and without fears of slippage. Additionally, having the Protocol itself hold its own LP tokens prevents our Users from having to take on the risk of Impermanent Loss themselves. Finally, the LP fees are accumulated by the Treasury which can make use of them to further grow the Protocol. 

Before you buy a Bond, there are a few small things you need to know about potential downsides. Bonds involve risk like any other DeFi interaction. While the Bond is maturing, you are temporarily illiquid and have neither the deposited stablecoins, nor gENCTR yet. This exposes you to the risk of not being able to sell gENCTR during that time if the price falls below a comfortable threshold for you.

Fortunately, because you are purchasing your sENCTR or gENCTR through a Bond, you will be receiving a discount compared to a DEX. This discount will be clearly indicated on the Bond purchase page.

Please note that it is possible for this discount to become negative if there is high demand. In that case, it is better to get your gENCTR through a DEX and wait for a positive discount.

Now that you know more about what Bonds are, hopefully you are excited to purchase one and help us grow the Protocol! Purchasing one is a simple process and all you need is some stablecoin or LP tokens to start.

Every few days, the ENCTR team will create a new bond market that will be open for several days until we manually close the market or enough Bonds have been sold for that market. There may be multiple bond markets open at once and we encourage you to check back often to see which markets are open. Below is a screenshot of the Bond market page in our application.

Purchasing a Bond is as simple as connecting your wallet with our application and clicking “Purchase”. Enter the amount that you would like to spend and select “Confirm”.

Once you have purchased your Bonds, you’ll be able to see a list of your maturing or unclaimed Bonds. If your Bond is fully vested, you will need to click “Claim” before the funds appear in your wallet. As seen above, you have the option to claim your bond as either sENCTR or gENCTR.

Chief Technology Officer

Developer and data scientist in machine learning and open technologies.