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Bonds made deflationary
The Galaxy Marketplace is a wing of Sphere Finance that allows users to buy $SPHERE from the treasury directly at a discount. Due to Sphere’s tax system, every sale deducts a portion of $SPHERE sold which is directed to the treasury for burn purposes. To further realize profit from this tax which can be used in other aspects of the protocol — Sphere issues bonds on the Galaxy Marketplace.
The classic bonding system currently in use achieves a profit by minting tokens & issuing bonds for certain assets. While this system works to give the treasury assets, it is highly inflationary in nature. What sets Galaxy Marketplace apart from the traditional model is that the tokens offered aren’t minted anew, but come from taxes!
The Galaxy Marketplace is made up of 3 parts.
- The Bond Oracle
- Asset Swapper
- Deflation Bot a.k.a. Fred
Simplified flowchart of Galaxy Marketplace
The Bond Oracle is a smart contract which decides at what point it is viable to issue bonds & decides the discount. Once a bond is issued, it is available to buy with assets such as $USDC.
Once the $USDC is deposited by the bonder, it is split 80/20 between the treasury & Fred Bot. The Asset Swapper automatically swaps the deposited assets to yield-bearing versions.
Fred Bot is the long-awaited burn bot which specializes in buying back and burning $SPHERE using the Galaxy Marketplace’s funds. 20% of the bond’s funds are sent to Fred by the Bond contract. Once sent, the bot either buys $SPHERE with them & sends them to a burn wallet and/or creates a $SPHERE LP token & provides liquidity to $SPHERE. This has the effect of promoting buy pressure on $SPHERE via the liquidity pool, but also price stability. The process is automatic, so as long as GM is used, so is Fred.
The process is quite simple, actually. The Galaxy Marketplace shows the different bonds available & their discounts. Once you’ve found a bond you wish to use, make sure you have the required asset. Now, all you need to do is deposit the asset & wait for your bond to distribute you $SPHERE.
To put it simply, the Galaxy Marketplace is beneficial to Sphereans because:
- It grows the treasury, allowing for more funds for future developments
- It acts as a burning mechanism for $SPHERE, promoting scarcity
- It grows the liquidity pool over time, promoting price stability
- It funds buybacks & burns for $SPHERE’s liquidity pool