ISPO Bonds

What are ISPO Bonds?

ISPO (Initial Stake Pool Offering) Bonds are a tool that enables anyone to increase their participation in an ISPO by borrowing ADA delegation power to do so. Just like all Liquidity Bonds, they allow anyone to borrow or ‘rent’ ADA staking rights and associated staking rewards for a fixed period of time. The staking rights to ADA are staked to an ISPO pool with the borrower receiving associated governance tokens from a project for their participation.

How do ISPO Bonds work?

Borrowers: Those who wish to borrow ADA staking rights Borrowers issue 'bonds' by offering specific terms to lenders who are willing to lock their ADA in a smart contract and allow borrowers to attach their own stake key to the locked ADA. Borrowers set the terms - such as interest rate, duration, and amount of ADA - then deposit the required prepaid interest for the amount they're requesting to borrow. Each bond issued by a borrower is for 100 ADA and is essentially a preset loan agreement. Borrowers typically choose amounts from 50K-250K ADA, equaling 5000-25000 Bonds. Lenders can buy bonds by depositing ADA into a smart contract in 100 ADA increments. There is also a minimum interest buffer, which is the minimum amount of interest that must be kept in the bond at all times. If the interest buffer is not maintained, the ADA in the smart contract is no longer locked and the lender can redeem it, at which point the borrower loses the ability to attach their stake key.

Lenders: Those who wish to lend ADA staking rights by locking their ADA into a smart contract. Lenders buy bonds, which are 100 ADA each, and lock their ADA into a smart contract under the terms defined by the borrower who issues the bonds. Each bond is redeemable for 100 ADA plus interest at the end of the bonds maximum duration or when the bond closes due to a borrower failing to pay the required interest. In both cases the lender's ADA is unlocked and can be redeemed for the 100 ADA underlying plus interest. Resources Some great articles and videos by partners and members of the community for further explanation 👇 - https://medium.com/@FluidTokens/a-step-by-step-guide-to-borrowing-while-increasing-your-position-on-fldt-ispo-through-optim-finance-9efbc57b05d4 - https://medium.com/@meteraprotocol/join-meteras-ispo-leveraging-optim-bonds-2300cceb4cd1