Types and Application Scenarios
CosmBank offers a diversified bond product suite to address different liquidity needs, market cycles, and treasury growth strategies. Each bond type serves a distinct role within the protocol’s economic architecture.
Reserve Bonds
Function：
Reserve Bonds allow users to purchase CSM at a discount by depositing stablecoins (e.g., USDT). The collected stablecoins are directly accumulated into the Treasury, strengthening reserve backing.
Application Scenarios：
During Bull Markets: Absorb excess market liquidity to suppress CSM inflation pressures.
During Bear Markets: Accumulate stable reserves to activate Inverse Bonds when price stabilization interventions are needed.
Reserve Bonds enable CosmBank to proactively manage liquidity, accumulate strategic reserves, and optimize the protocol’s long-term capital structure.
Inverse Bonds
Function：
Inverse Bonds allow users to sell CSM back to the protocol in exchange for stablecoins, settled immediately without vesting.
Application Scenarios：
During Bear Markets: Directly absorb sell pressure from the market and provide a price support mechanism for CSM.
Cycle Hedging: Works in tandem with Reserve Bonds, forming a cyclical hedge system that balances liquidity flows across different market conditions.
Inverse Bonds serve as an active stabilizer, offering the protocol a dynamic tool to counteract negative market sentiment and protect price anchors.
Liquidity Bonds
Function：
Liquidity Bonds allow users to deposit CSM-USDT LP tokens to acquire discounted CSM bonds. In return, the protocol permanently locks the received liquidity, strengthening DEX depth and ensuring long-term market stability.
Pricing Logic：
The Risk-Free Value (RFV) of LP tokens is determined based on the constant product formula:
LP Share: User’s proportion of the total liquidity pool.
√(CSM × USDT): Square root of token reserves, reflecting the minimum theoretical value.
This RFV-based pricing ensures that the protocol does not overpay for LP assets and maintains capital efficiency.
Liquidity Bonds enable CosmBank to internalize liquidity ownership (Protocol-Owned Liquidity), reducing reliance on mercenary liquidity and enhancing market resilience.
CSM Bonds
Function：
CSM Bonds offer users a transition from liquid CSM holdings into time-locked positions with vesting properties similar to sCSM — without immediate governance power delegation.
Features:
Time-Locked Holding: Users bond CSM into a locked state for a predefined duration.
Market Sell Pressure Reduction: Time-locking CSM helps to mitigate short-term sell-offs, improving price stability.
CSM Bonds bridge the gap between fully liquid assets and governance-locked tokens — offering a flexible mechanism to align user incentives with long-term protocol health.
Last updated