Tomb Finance Problematic Bond Mechanics and the Airdrop Band-Aid

Tomb Tuesday this week was a lot of bullish information to take in and actually put my issues with Tomb Finance on hold for a while. I previously wrote in my Approaching Equilibrium article about how the yield figures are representative of demand for the protocol’s tokens (or influx of new money). When TWAP was hovering below 1 and Tomb finance was in a contractionary phase, I believed we had hit the equilibrium. At Equilibrium, you would expect the protocol to hover in between the Contractionary phase and the Debt Phase. This is where the TBOND mechanic starts to play a bigger role and the problems it has could start to become more apparent. BUT the recent Tomb Tuesday announcements might just be enough to solve a lot of these problems.

First let’s go through the problem with TBONDs, probably the biggest vulnerability of Tomb Finance:

TBONDs are supposed to encourage buying up TOMB and burning TOMB supply, this reduces TOMB available for use in the whole Fantom ecosystem and helps to push up TWAP to restore the peg.

Issue #1: The incentive system for holding TBONDs

The incentive system works in such a way that TBONDs would yield you an even greater amount of TOMB when TWAP rises above 1.1. Or you could just claim them for TOMB 1:1 when the peg is restored.

This is problematic as it means that the existing amount of TOMB can never really shrink and can only expand. Imagine you have a pile of coins…