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What are zClay bonds?
The bonds are issued at a 60% APY. There will likely also be a secondary market. After the conclusion of issuance, bond prices will solely be determined by the market. If the market is efficient, prices of zClay denominated in Clay on the secondary market would be expected to be the same as the daily issuance price and continue to decline at the same rate shown here once issuance has finished after 1 year. The price should reach almost 1:1 on the final day before maturation.
This is a program whereby people can stake the Clay they either mined or purchased and receive a zClay bond in return.
Although over the last ten years cryptoassest have been spectacularly successful, valuations have been very volatile prone to short-term profit-seeking despite the fact the full potential of this technology will not be realised for some years. When people take a long-term view, some of the short and medium-term cyclical volatility can be removed from the market. These holders provide a bulwark against fickle short-term speculators. In designing the mining programs therefore, we wanted to implement a mechanism through which people are well-rewarded for taking a long-term view.
That mechanism is CLAY bonds whereby holders of CLAY can lend them to the protocol and receive a bond (zCLAY) that entitles them to their loan along with interest denominated in CLAY upon maturation of the bond. Since the interest is only paid upon maturation, it is a zero-coupon bond. The bonds return a 60% APY denominated in CLAY. The earlier one lends CLAY to the protocol, the higher their payout in CLAY upon maturation.
zClay can be traded on secondary markets such as SumSwap if people wish to exit their positions before maturation of the bond. It is expected zClay will “trade dirty” meaning it will trade at a steep discount to Clay early on, gradually approaching parity as maturation approaches. Consequently, both short-term and long-term profits denominated in CLAY are possible with zCLAY bonds.
This program will not open until one month after the liquidity program has begun as there needs to be supply of CLAY for people to lend.