♻️For Stakers

A Rising Price Floor

In traditional markets, price action is the determining factor of value. This is less so with CADT since stakers’ equity will increase over time, creating a steadily falling cost basis. Therefore CADT balance is more important than face-value price. Stakers should care more about longer-term growth than immediate price action since the protocol dictates a rising price floor for CADT tokens.

A Falling Cost Basis

When users stake their CADT tokens, they will receive compounding rewards. Given that the protocol uses bond sales to create a rising price floor for CADT dictated by the backing per CADT token, over the long-term, price volatility is not a risk for stakers, since their cost basis will eventually fall below the backing per CADT token.

For Bonders

Donation Bonders will care more about the price of the CADT token. This is because bonding assures a static CADT reward. Let’s assume that the price of CADT is exactly $1 and a bonder buys a bond of $100 worth of CADT. Their static assured reward will be 100 CADT. If the price of CADT now increases to $2, the bonder will gain $200 USD in CADT. Therefore, bonding is sensible in anticipation of increasing CADT prices. Given that bonds are issued at a discount, bonders will also profit if the price of CADT remains the same. In essence, this acts similarly to staking in that Bonders' CADT holdings will increase over time as the bond matures.

Rising Prices

Periods of rising price are the most lucrative for Donation Bonders, since the discount they receive on tokens will be larger.

Stable Prices

However, it is still profitable to buy donation bonds during flat price action, since bonds will run at a discount to market prices. This will have the effect of increasing APYs and making market purchases more lucrative, thus bringing market prices up.

Falling Prices

In periods of price reduction, bonding will be less profitable since the market price of CADT could fall below the initial price that a bonder purchases. Therefore it is more profitable to buy from the market during dips. This in turn stabilizes prices and allows bond prices to re-adjust and offer discounts once more.

How the protocol reacts to the markets

The price of CADT will be more volatile at first. In periods of high demand, the protocol will be able to create higher staking rewards by selling more bonds. This in turn will bring in more users seeking wealth creation, which increases demand further. This will create a feedback loop leading to the expansion of the project and an increasing CADT price. Expansionary periods also allow the DAO to increase the liquidity held in its reserves.

In periods of low demand, staking and bonding rewards will also fall. This is a natural part of price action - nobody in the Cryptocurrency space is a stranger to falling prices. When prices fall far enough, the protocol will use its reserves to buy CADT and stabilize it. Given that this reserve intervention is a certainty, risk falls as the price falls since buying volume is anticipated.