The problem
All we agree that we need a recapitalization bond. But discussion is shifted to whether this bond need to be a token that will eventually replace NSBT in the future. The argument for doing this is about incentives: who will issue recap bonds without incentives? On the other side, there are strong arguments to have recap bond separated from NSBT and never merge them:
- A recap token cannot have an issuing limit (otherwise we will end again as NSBT now and its very limited capacity to recapitalize)
- a governance token is not compatible with easy issuing, otherwise governance can be easily abused.
- additionally, under the perspective of deprecation of NSBT, their holders, which conform one of the stronger support community, will be cheated and left with nothing. The argument that they can exchange their NSBT by new tokens at market price is absurd. NSBT market price will fall quickly to zero under this perspective.
A solution
There is however a solution that provides incentives to issue the new recap bond and don’t deprecate NSBT: when BR < 1, bond issuers got only temporally some of the powers of NSBT holders (swap fees and swap rights, never governance). When BR is restored, bonds disappear and all NSBT powers return to normality.
- So, let’s say OBR is a constant and represents the optimal BR (i.e. just 1, or 1.2, or 1.5, or even below 1 if we think that don’t really need BR 1 to be healthy). Probably the best value here is just 1, but lets use this parameter OBR for generality. Also, this parameter may need adjustment according to desired incentives: if an initial OBR of 1 is not enough incentive, it can be increased. The larger this number, the larger will be the opportunity window time for profit for bond issuers (and the less for NSBT holders)
- NSBT holders have their powers adjusted by BR/OBR factor, while bond issuers by max(0, (OBR-BR)/OBR).
- The speed of bonds decay is inversely proportional to (OBR -BR). This decay is the speed at which the smart contract returns the waves to the issuers (with may be a max value in order to avoid instability around BR=1)
- Issuing price of bond unit is always 1 waves. Returned waves as bond decay is again 1 waves/bond unit. The SC retains the staking yields generated by these temporal leased waves for definitive recap.
Additionally, notice that there is no even need the bond be really a token. It can be a data record as it is now gNSBT or gWX.