SPO Bonds

What are SPO Bonds?

SPO (Stake Pool Operator) Bonds are intended as a tool for SPOs to bootstrap ADA delegation to their pools in order to mint blocks consistently, boost their ROA, and prove operational proficiency. This can be leveraged to attract sustainable community delegation for long-term success.

How do SPO Bonds work?

SPO Bonds will have a minimum number of months of required interest paid into them (likely 3). This gives lenders a longer-term interest bearing position and allows SPOs to smooth out the luck factor associated with block production. After the period covered by the initial interest expires, SPO borrowers must keep enough interest in the bond for a 1 month/6 epoch buffer of interest to keep bonds active or the bonds can be closed.

As long as SPOs pay/deposit this much interest in the bond they can keep the bond active for the maximum term of the bond defined upon issuance (6 months or 1 year for example). The maximum term is the longest a borrower can keep a lender’s ADA locked into a bond for. If a lender wishes to recover their ADA before this term expires, assuming an SPO keeps the bond active by paying required interest, they can trade the bond on the secondary market.

If you are a Stake Pool Operator and wish to get more acquainted with SPO Bonds to strengthen your position within the Cardano ecosystem, read this guide for more information!

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