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How Bonds Work on Neptune Mutual

With Neptune Mutual, users can supply liquidity into a decentralised exchange (DEX) by…

How Bonds Work On Neptune Mutual

With Neptune Mutual, users can supply liquidity into a decentralised exchange (DEX) by adding a DAI-NPM pair.

In return, users get a proof of deposit (POD) token they can use either to reclaim the DAI/NPM liquidity they supplied, or to exchange it for discounted NPM tokens in the Neptune Mutual bond pool. On the platform, you can find this functionality in the Bond tab.

Let’s find out why one might want to supply liquidity to a DEX and potentially exchange liquidity pool (LP) tokens for NPM tokens:

How Do Neptune Mutual Bonds Work?#

Neptune Mutual’s Bond feature lets you exchange a certain amount of DAI/NPM liquidity you’ve supplied for discounted NPM tokens.

To purchase a bond on the platform, you have to supply DAI/NPM liquidity to any DEX available on Neptune Mutual. In exchange, you get rewarded a fee based on all trades that follow after you supply liquidity to the pool. The amount of fees you receive is proportional to the amount of DAI/NPM liquidity you supplied in comparison to the total amount of liquidity in the pool.

After you’ve supplied liquidity to the DEX, you can reconvert your LP tokens back into DAI/NPM tokens.

If you want to “sell” DAI/NPM liquidity in the Neptune Mutual bond pool, you need to exchange your LP tokens in the Neptune Mutual bond pool in exchange for NPM tokens.

When you commit LP tokens to the bond pool, the discount on the price of these tokens, the bond price, is correlated to the current market price of NPM tokens.

The combination of the number of NPM tokens you receive along with the bond price will determine the ROI estimate calculated at the time of the transaction.

Note that you will only get your NPM tokens after the lockup period.

You will make a greater ROI than expected if there’s an increase in the market price of NPM tokens between when you complete your bond transaction and when you claim your NPM tokens after the lockup period.

On the other hand, if the market price of NPM tokens drops below the discounted price when you claim your NPM tokens, then you will incur a loss, assuming of course that you decide to sell your NPM tokens at that point.

Now that you know what happens in the Neptune Mutual bond feature, take a look at this short video and step-by-step guide on how to purchase bonds on the Neptune Mutual platform.

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About Us#

Neptune Mutual project safeguards the Ethereum community from cyber threats. The protocol uses parametric cover as opposed to discretionary insurance. It has an easy and reliable on-chain claim process. This means that when incidents are confirmed by our community, resolution is fast.

Join us in our mission to cover, protect, and secure on-chain digital assets.

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