> For the complete documentation index, see [llms.txt](https://docs.rwa.vip/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.rwa.vip/iii.-rwa-ecosystem-protocol-operation-mechanisms/bond-contract/liquidity-bond-sales.md). # Liquidity Bond Sales In the RWA Ecosystem, the process where users trade RWA-USDT LP with the RWA Ecosystem protocol is called purchasing liquidity bonds. The protocol acquires ownership of the LP tokens, while users lose ownership of the LP tokens. As compensation, users will receive more RWA tokens at the transaction price. To purchase liquidity bonds, users must first add liquidity to the RWA-USDT trading pair to receive LP tokens. Then, they can use these LP tokens to buy liquidity bonds. The protocol acquires ownership of the LP tokens and simultaneously calculates the Risk-Free Value (RFV) of the LP. The RFV of the LP is measured in terms of the quantity of RWA tokens. $$ RFV = (LP / Total LP)² sqrt(Constant Product) $$ {% hint style="info" %} Constant Product is the constant product of the specific LP {% endhint %} The protocol then calculates the executing price of the bond, with the executing price measured in terms of the RWA quantity. $$ Executing Price=RFV/Premium $$ {% hint style="info" %} Premium ≥ 1 {% endhint %} Premium is the bond premium, which is determined by the system's total debt and a scaling variable. It links the bond price to the quantity of outstanding bonds (each bond has a 5-day exercise period). $$ Premium=1+(Debt RatioBCV) $$ {% hint style="info" %} Debt Ratio=Bonds Outstanding/ RWA Supply BCV is the adjustable inflation rate of the protocol. Bonds Outstanding refers to the number of outstanding (unpaid) bonds. {% endhint %} Dynamic bonds provide users with a corresponding discount (Discount) at a proportional rate, meaning the greater the discount, the higher the return on investment (ROI). The bonds have a 5-day exercise period, and after the exercise period ends, users receive RWA tokens. This process is irreversible. $$ ROI =(RWA Trading Price Executing Price/LP Actual Value )-1 $$ $$ \= (RWA Trading Price RFV /LP Actual Value Premium)-1 $$ The number of bonds currently in the exercise period (Bonds Outstanding) determines the bond premium (Premium). The fewer the number of bonds in the exercise period, the lower the bond premium, and the higher the execution price (ExecutingPrice). As a result, the higher the return on investment (ROI) for users purchasing the bonds (greater discount), which in turn increases the incentive for users to purchase the bonds. **The benefits of a large volume of liquidity bond sales for the protocol are:** 1. Permanent locking of a large amount of RWA-USDT trading pair liquidity; 2. The liquidity of the RWA-USDT pair is positively correlated with the RWA price; 3. The higher the liquidity bond premium, the lower the bond discount. 4. Increase the treasury’s asset-liability balance by evaluating the risk-free value of LPs, ensuring that the equilibrium value is always greater than $1, meaning RWA has an intrinsic support price of 1 USDT; 5. Liquidity bond exercise period is 5 days, ensuring that the protocol can distribute profits to users who have staked RWA. ### The "problem" of liquidity bond sales: Users purchasing liquidity bonds with RWA-USDT LP tokens, where the LP is owned by the treasury, will cause the treasury to recognize a significant difference between the LP's market value and its intrinsic value. The treasury will mint RWA based on the LP it acquires, ensuring it has enough funds to support the RWA. Therefore, the treasury will evaluate the LP at its minimum value, which is the previously discussed risk-free value (RFV). The higher the premium, the greater the gap between the market value and the risk-free value. For example, an LP consisting of 10 RWA and 1000 USDT (market value of $2000) and having 100% share, would have an RFV of 200 RWA (2√(101000)). The existence of RFV introduces the issue of RWA minting volume. In the example above, the protocol mints one RWA for $5 (the treasury receives 1000 USDT and mints 200 RWA), rather than minting at the support price of $1. While this RWA minting method is feasible when the protocol needs to lock in more liquidity, its efficiency in minting RWA is relatively low and cannot meet the market's demand for rapid supply growth. Therefore, the protocol will sell reserve bonds to address this "issue." --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.rwa.vip/iii.-rwa-ecosystem-protocol-operation-mechanisms/bond-contract/liquidity-bond-sales.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.