Operation Mechanism

The CosmBank bond system operates through a transparent and automated auction-based process, consisting of two core phases: Purchase Flow and Key Pricing Formulas.

(1) Purchase Flow

Step 1: Capital Commitment

Users commit designated assets (e.g., USDT or CSM-USDT LP tokens) to purchase bonds.

Step 2: Dynamic Discount Pricing

The bond price is dynamically adjusted via a Discount Rate:

• Positive Discount: Bond price is lower than the market price — incentivizing immediate purchases.

• Negative Discount: Bond price is higher than the market price — discouraging excessive bond demand.

Step 3: Linear Vesting

Purchased bonds are subject to a 5-day linear vesting period. After completion, users receive their entitled CSM tokens in full.

The sequential auction and discount-adjusted pricing model ensure fair market-driven allocation and prevent opportunistic arbitrage.

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(2) Key Pricing Formulas

Executing Price

Executing Price = RFV / Premium

Where:

• RFV (Risk-Free Value): The base value of the committed asset.

• Premium: dynamically calculated based on the protocol's total outstanding bonds and a scaling parameter (BCV).

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Premium Calculation

Premium = 1 + (DebtRatio × BCV)

Where:

• DebtRatio = Outstanding Bonds / CSM Supply

• BCV (Bond Control Variable): A governance-controlled parameter that adjusts bond issuance aggressiveness.

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Return on Investment (ROI)

ROI = (CSM Market Price × Executing Price / Committed Asset Value) - 1

Where:

• Committed Asset Value: Actual market value of the asset paid by the user.

These formulas create a dynamic feedback loop — automatically adjusting bond pricing to market supply, demand, and protocol debt levels.