Use Cases and Benefits

Acquiring Protocol Owned Liquidity (POL)

Acquiring POL offers a protocol vital advantages in ensuring liquidity during both stable and volatile market conditions. POL serves as a guarantee to users that adequate liquidity will be available and prevent shortages in times of market distress. Additionally, it transforms liquidity from a liability into a sustainable revenue source. With every swap transaction contributing a fee to LPs (0.3% for Uniswap and 0.25% for Sushiswap), the lockup of liquidity within the treasury creates a revenue stream for the protocol.

Diversifying Treasuries and Extending Runway

Incorporating bonds into treasury diversification strategies enables protocols to introduce their native token as the payout token. This approach allows projects to acquire quote tokens, such as stablecoins and ETH, without destabilizing their treasury through open-market trades. Diversifying the treasury in this manner offers risk mitigation, stability during market fluctuations, and agility in managing project funds, all of which are critical benefits for any project regardless of size.

Acquiring Strategic Assets

As projects mature, the need to secure strategic assets (e.g. CVX or CRV) to accelerate growth often arises. Bond issuance provides a more effective method of acquiring vital tokens that contribute to the project's ecosystem. Alternative methods that have been used to acquire strategic assets include treasury swaps, OTC trades, or operating on the open market — all of which can be difficult to facilitate, require extensive strategy, or are simply not ideal.

Funding Growth Initiatives

By designating the native token as the payout asset, projects can attract bonders who are long-term aligned. The quote assets acquired through the bond market can fuel expansion, development, marketing efforts, and other growth-focused activities. This synergy generates value that circulates back to the stakeholders, establishing a healthy growth cycle.

Bootstrapping Cross-Chain Initiatives

Beyond addressing technical challenges, most protocols require sufficient liquidity for their native tokens when expanding to new Layer 1s and Layer 2s. Bonds can facilitate the acquisition of required base assets for liquidity provision or the LP tokens themselves (POL).