Self-Regulation Mechanism

CosmBank’s bond market architecture is designed to dynamically self-balance without requiring manual intervention — allowing bond pricing, demand, and issuance rates to respond automatically to market conditions.

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(1) Dynamic Supply-Demand Balancing

The system continuously monitors the amount of Outstanding Bonds (unvested bond commitments). This outstanding debt directly influences the Premium, creating a natural feedback loop:

• Low Outstanding Bonds → Lower Premium → Higher Executing Price → Larger ROI (Discount) → Incentivized Purchasing

• High Outstanding Bonds → Higher Premium → Lower Executing Price → Smaller ROI → Demand Suppression

By linking bond pricing to real-time debt conditions, the protocol creates an autonomous supply-demand adjustment mechanism — stabilizing bond issuance without relying on centralized management.

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(2) Delayed Vesting Effect

The 5-day linear vesting period introduces a smoothing effect on CSM emissions:

• Reduces Immediate Market Impact: Newly minted CSM is gradually released, preventing sudden selling pressure spikes.

• Creates Arbitrage Opportunities: The price difference between secondary market and bond executing price during vesting can drive trading activity — promoting liquidity, but also introducing controlled short-term volatility.

The delayed vesting model balances emission management with market dynamics, fostering a healthier, more liquid secondary market environment.