The Evolution of Bonds
The problem that Finance-as-a-Service (FaaS) protocols are facing since their inception is that for every buy on the open market, only a few percent of that buy feeds into the treasury as reflection tax while the market cap grows disproportional faster.
Most FaaS protocols trade at a multiple of their treasury! Let us look at a made-up example that has somewhat realistic metrics:
Smooth Brain Capital
Market cap: $1.000.000
Treasury: $ 400.000
What the numbers mean for potential investors is that they buy into a token with a market valuation which is 2.5 times higher than the underlying treasury.
In a nutshell, for every token of Smooth Brain Capital you buy, you would get only 40% of the value you put in.
Treasury managers of Smooth Brain Capital now have the gargantuan task of growing the treasury in a way that it keeps up with their market cap.
As we observed the same problem, Scary Chain Capital introduced self-developed bond contracts, called Instant Bonds. Opening strategic bond periods to inject assets directly into our treasury in exchange for treasury-held $SCC tokens proved to be a sophisticated way to keep SCC’s ratio close to 1. During these periods our treasury grew more than a couple hundred thousand dollars through bonds only.
However, this proved to be a double-edged sword.
Our treasury grew immensely, but the SCC chart looked abandoned. Treasury grew and the market cap stagnated. It even went so far as interested users waited patiently for the opening of bonding periods to purchase our tokens instead of buying on the open market; others looked at the chart and maybe even sold in fear.
We have found a solution and are happy to finally introduce Scary Chain Capital’s Smart Swaps.
Our developers have been busy working behind the scenes and came up with a new smart contract that will combine the best of both worlds, open market buys that fuel price action and bonds to help treasury keep up.
For the users this happens in the background as the Smart Swaps will be implemented on our website directly and all the user has to do is choose the amount to buy SCC with.
The formula is simple:
buyValue = x * buyValue + y * buyValue
x + y = 1
x = DEX
y = Instant Bond
If a user wants to purchase $1000 of SCC and the ratio is set to x=0.8 and y=0.2, the following happens:
The Smart Swap will route $800 dollars through UniSwap or SpookySwap using the liquidity pair, but without buy tax, and 20% though our Instant Bonds.
The user chooses the amount and the smart swap handles the rest!
This has multiple advantages:
- easy to use for the user
- nobody needs to wait for bonding periods
- no more buy tax
- market cap/ treasury ratio stays close together
- team can regulate the buy/bond ratio
- market cap and treasury grow with every buy
- best of both worlds
Once the Smart Swap is active, the initial ratio will be set to 20% Instant Bonds/ 80% LP as in the example above.
The Scary Chain Capital team will closely watch the metrics and if necessary adjust the ratio of bond-buy to market-buy to guarantee healthy and consistent growths.
All in all, we believe the implementation of our Smart Swap will benefit Scary Chain Capital and its community greatly!
Last but not least, we are offering our SmartSwap as a very cost effective service to other protocols who believe their project could benefit from growing their treasury at a closer relation to their market cap without having to launch a new version of their contract.
Feel free to reach out to us via Twitter, Discord or Telegram!