BOUND Engine
Enabling Secure, Sustainable Token Launches in DeFi
Last updated
Enabling Secure, Sustainable Token Launches in DeFi
Last updated
The BOUND Engine is a decentralized system that leverages bonding curve calculations to determine the price of bonded tokens, ensuring their value remains intrinsically linked to the collateral value. This innovative mechanism reduces the likelihood of token failures, fosters organic market growth, and mitigates risks like speculative price manipulation, thereby enhancing the sustainability and long-term viability of tokens.
Important Note
This system is not a collateralization mechanism or an asset-referenced token model (e.g., index price). Token holders cannot redeem tokens or claim any ownership rights in the underlying portfolio.
The BOUND Engine is an advanced algorithmic mechanism designed to maintain the token price bound to the collateral value by dynamically minting or buying back bonded tokens, ensuring the token price aligns with its intrinsic value.
When the secondary market price of the token exceeds the buy token price calculated by the BEM engine mechanism, the BOUND Engine triggers the release of additional token supply in circulation from the BOUND Treasury. The liquidity generated from injecting new supply is deposited into the Stability Fund and then allocated to the underlying portfolio. This increases the underlying asset's value, creating a stronger foundation for the token. Buy Price (B): A linear function, B(x) = b *x, where b is the slope and x is the total number of tokens issued. The slope b dictates the granularity of pricing, with smaller values allowing for greater fractional token granularity.
When the secondary market price of the token falls under the sell token price calculated by the BEM engine mechanism, the system activates a buy-back mechanism using Stability Fund reserves. The tokens purchased are burned, reducing the circulating supply and increasing the token’s value. Sell Price (S): This is linear, S(x) = s * x, where s is the dynamic slope that adjusts based on market activity and cash reserves.
The spread between the Buy and Sell curves represents the price range where the token is aligned with its intrinsic value. When the price moves outside this range, the system automatically intervenes to bring the price back in line with its intrinsic value. After each intervention, the intrinsic value is adjusted based on the system’s demand dynamics, ensuring that the token remains sustainably linked to its collateral value.
Where:
α
Weight for price change sensitivity
ΔP
Difference between the token price and the share price of the portfolio
β
Weight for market performance
δ market
Market volatility coefficient, accounting for real-time fluctuations
γ
Weight for trading volume sensitivity
Vn
Trading volume over a specified period n, reflecting the market activity
P avg
Moving average token price over a specified period
λ
Weight for liquidity sensitivity
ΔL
Change in total liquidity, accounting for additions or removals of liquidity
τ
Weight for tick spacing sensitivity
Ts
Calculated tick spacing, representing the price intervals between ticks
Understanding the dynamic relationship between the token and the performance of its collateral value requires a closer look at the BOUNDING mechanism and the key components of the BOUND Engine. These decentralized elements work harmoniously, leveraging advanced algorithms and smart contracts to adapt seamlessly to evolving market conditions. Below, we delve into the key components of the BOUND Engine, their functions, and how they contribute to the system’s overall operation.
The CLOUD SYNC Oracle is the computational core of the BOUND Engine, processing real-time data to make informed, automated decisions. It ensures the system operates efficiently and maintains the dynamic connection between the token and its collateral value.
Analyzes Variables
Continuously collects and analyzes real-time data on the performance of the underlying portfolio, token price fluctuations, market volatility, and trading volume.
Adjusts Price Alignment
Executes weighted computational models and advanced algorithms to calculate the bond token sell and buy price.
Triggers Automated Transactions
Activates smart contracts to execute automatic recalibration transactions, such as injecting supply, buy-back tokens, or reallocating liquidity, when token price brake the intrinsic value range.
Decentralized Execution
By leveraging decentralized infrastructure, the CLOUD SYNC Oracle ensures transparency, security, and efficiency in all system recalibration processes.
The Stability Fund is a decentralized vault designed to provide liquidity for the system to execute the recalibration transactions required by the CLOUD SYNC Oracle. By ensuring instant liquidity, the Stability Fund enables the BOUND Engine to perform immediate transactions during market imbalances.
Upper Threshold
When accumulated revenue in the Stability Fund surpasses the Upper Threshold, excess liquidity is deposited into the underlying portfolio. This approach strengthens the portfolio’s asset base, increasing its capacity to generate profits that sustain the token’s long-term economic model. Liquidity is kept in the Stability Fund until the Upper Threshold is reached to enable immediate transactions and avoid inefficiencies in gas usage caused by constant deposits and withdrawals from the underlying portfolio.
Lower Threshold
When the Stability Fund’s reserves begin to deplete and the Lower Threshold is reached, the system automatically withdraws profits generated by the underlying portfolio. These profits replenish the Stability Fund to sustain the burning mechanism, ensuring ongoing stability.
Profit-Only Withdrawals
To preserve the principal and avoid depleting the underlying portfolio, only profits generated by the portfolio are withdrawn to replenish the Stability Fund. This ensures the portfolio’s principal remains intact, maintaining its ability to generate sustainable returns over time.
Dynamic Liquidity Management
The Stability Fund is carefully managed to maintain liquidity between thresholds, allowing the system to respond swiftly to market fluctuations. This ensures fast transactions and provides a safeguard against price manipulation attempts.
The Stability Fund is an integral component of the BOUND Engine, providing the liquidity necessary for recalibration transactions, addressing market imbalances, and dynamically supporting the system’s operational flow. It ensures the BOUND Engine can respond effectively to changing market conditions while protecting the integrity of the underlying portfolio.
The BOUND Treasury is a decentralized vault designed to release token supply for the recalibration transactions required by the CLOUD SYNC Oracle. It represents the primary source of revenue to expand the asset base of the underlying portfolio.
During periods when the token price trades at a premium relative to its underlying value, known as Upper BOUND scenarios, the BOUND Treasury releases token supply into the market. This mechanism supports recalibration while facilitating the strategic enhancement of the underlying portfolio’s asset base.
The BOUND Treasury is a vital enabler of the CLOUD SYNC Oracle’s recalibration process and supports the system’s broader liquidity and sustainability framework.
Supply Releases
Tokens are released strategically during Upper BOUND scenarios, leveraging favorable market conditions to release new supply in circulation and generate revenue.
Revenue Allocation
Revenue from supply releases is directed to the Stability Fund before being reinvested into the underlying portfolio. This structured flow strengthens the portfolio’s asset base and enhances its capacity to generate sustainable profits over time.
Sustainability Through Portfolio Expansion
By reinforcing the underlying portfolio during favorable market conditions, the system creates a robust foundation to sustain token value even during periods of volatility, ensuring resilience and adaptability.
The BOUND Treasury supports the system’s recalibration processes and the growth of the underlying portfolio, ensuring long-term stability. As an integral part of the BOUND Engine, the BOUND Treasury ensures the sustainability of the token by enhancing the portfolio’s capacity to generate higher profits.
