Why Bonding?

BONDING vs FARMING

Why Protocol Owned Liquidity (POL) is essential foir sustainability in Web3

Bonding is a superior and more universally beneficial method of generating liquidity than yield farming.

$TENDIES is at the heart of the new TendieSwap DEX and Defi Hub. Like any project, the underlying token needs to have value in order to be attractive to, and therefore retain its community and users. Value is determined by the free market. Users are able to swap one token for another, and also to provide liquidity in pools. A liquidity pool (LP) is a pair of tokens in equal value : in this case $TENDIES and $TENET. To provide liquidity, one places an equal value of each token into the pool. E.g. $100 of $TENDIES and $100 ofTENET = $200 of liquidity in the $TENDIES-TENET pool

The receipt for this deposit is in the form of LP Tokens and represents the amount of each - not the value.

The importance of liquidity

Simply - slippage. Slippage is bad. Slippage is the result of low liquidity where relatively small transactions can have a dramatic effect on the price. Traders will need to pay a bigger fee for swaps where liquidity is low.

When swapping crypto tokens, you want slippage to be low and to achieve this you need DEEP liquidity. Lower slippage makes trading easier and as a result delivers higher volume and healthier charts.

LP Farming risks.

To build more liquidity, many projects incentivise users to stake LP tokens in return for rewards, usually in the form of a project’s native token. In our case, if you were to provide liquidity in the TENDIES-TENET pool, and stake your LP tokens you will be rewarded with more TENDIES tokens. This is known as yield farming.

The downside is that once the rewards become too little (more people entering the pool, reducing emission rates) LP providers (Farmers) will move on to the next project with high yields, leaving the project and its community out of pocket. They dump their rewards on the market and remove their TENDIES-TENET from the liquidity pool. The result is a return to lower liquidity and subsequent high slippage.

Yield farming is an unsustainable solution for the promise of initial investment, rewards are limited and long-term projects with the best intentions are often hampered by the destructive nature of LP farming.

Better to BOND!

Bonding is a sustainable alternative to farming, where both the community and the project align for mutual long-term reward.

With Bonding, you still create LP pairs but instead of staking for rewards, community members sell their LP tokens back to the protocol in exchange for a bonus. This bonus is expressed as ROI (Return on Investment) rather than a traditional APR or APY and is expressed over the vesting period (ie. x% over 5 days)

It works like this: A user buys TENDIES and TENET and provides liquidity in the TENDIES-TENET pool as before but the LP tokens received (the receipt), is sold in exchange for a bonus amount of TENDIES - -effectively buying TENDIES at a discounted rate equal to the ROI. This requires 5 days of vesting before the total reward pool can be claimed. The vesting term can be changed as the needs of the project evolve.

Ultimately, TENDIESWAP buys LP tokens from the LP provider and rewards the provider with bonus TENDIES on top.

So: User bonds $100 worth each of TENT-TENDIES

User receives $100 + 100*ROI of TENDIES over 5 days.

It’s a win-win for the project and the community. The user ends up with bonus TENDIES after the vesting period, and TENDIESWAP takes ownership of the market liquidity. This is the definition of Protocol Owned Liquidity.

Moreover, there is NO Impermanent Loss with Bonding - further reducing the risk for users.

The more LP tokens brought back from liquidity providers, the smaller the risk that large amounts of liquidity are removed from the pool. The result is positive trading conditions with minimal slippage and the depth of liquidity to allow larger trades with minimal impact on price.

Through Protocol-owned Liquidity, liquidity providers can earn rewards on their contributions, while the protocol generates a share in the liquidity pool. This brings more price stability, lower slippage, and more revenue to benefit both the project and the community.