Onboard Optim Finance Bonds (OBONDs) as a collateral to mint iAssets

Optim Finance protocol allows stake pool operators to issue fixed term bonds to collect and stake meaningful amount of $ADA to their pools. This is critical for new/small Pools and eventually it helps further decentralisation of Cardano chain. The Optim Bond is a protected and rewarded debt. I.e. the issuer defines the duration of the bond (usually 12 months) and the fixed reward (currently 5.33% APR in average). The issuer deposits reward amount in advance for the next 6-12 epochs and then adds the reward amount for the remaining epochs (in advance). If this condition is not met in advance the bond is liquidated and the holders of the bond shares receive their contribution plus accumulated reward.

Therefore this type of collateral is quite solid and can be used on Indigo to mint iAssets. If OBOND is liquidated then the collateral at Indigo should be transformed into respective amount of $ADA thus not losing its underlaying value.

If implemented, this proposal can significantly boost TVL and transactions volume on Indigo + help overall Cardano DeFi grow.

Thank you

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This is very interesting. Is the liquidity of the bonds consistent? Is there a fee for transferring or cashing in a bond? The bonds having fixed term limit would of course create a CDP with a term limit which would be very interesting. In order to do this I would imagine there would need to be an oracle to monitor bond health/value? Or is bond value constant and unchanging? Looking forward to alternative collateral options.

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I believe this can unlock the power of Cardano’s defi ecosystem. There is a little more risk involved but it’s offset by how the bonds and indigo protocol are structured. As long as users understand the risk this could be a great thing for Indigo. A lot of different use cases can be explored just by this one move. I’m for it.

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This needs more engagement. Integrations like this between different defi protocols is what is going to bring people from other chains to Cardano.

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That would be excellent… dapp interoperability is very much needed in the cardano ecosystem. I support this to the full…

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Hi! The underlaying bond value is indeed constant. E.g. the issuer requests 1 mln of $ADA and registers a bond at Optim. People contribute their amounts and in exchange receive this specific bond tokens representing their contribution share in the bond. Once bond is fully filled it gets released, i,e. becomes active for the duration of maturity and the issuer-operator can stake this bond in their staking pool to increase chances of producing blocks. The bond reward is accumulated based on your bond tokens amount every epoch at the fixed rate which the issuer defines and locks in advance in the parameters of the bond (currently the most popular rate is 5.33% but people can choose to which bond contribute at which rate). Once OBOND matures, holders of OBOND tokens get their contribution back + reward. Those OBOND tokens are planned to be traded on open market while the bond is being matured - their market value would be defined by supply / demand. But at maturation their value is constant (principle + reward). I am not sure there are fees (beside network fee) for people to contribute - at least i do not recall when i participated.

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Yea I was thinking about this. This will definitely increase the TVL. Something someone mentioned is how strong is the OBOND smart contract.

Moreover, I think the underlying pair can become more stable as bonds are locked up for 70 epochs. This Can free up Ada that’s placed in colateral allowing users to use it in an LP, increasing liquidity in DEXs.

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This seems interesting but I don’t fully understand. Could you use an example?

you contribute to Optim bond → you get Optim Bond Tokens → you put Optim Bond tokens as collateral on Indigo and mint iAsset

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As a holder of OBONDs, I would really like to see this occur.

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