# Karma Bond mechanics

1. A user bonds LP tokens (e.g. Token X/stable coin).
2. LP tokens go to the Karma Bond contract and are distributed to the corresponding protocol treasury contract.
3. The Karma Bond contract receives the protocol token at a discount from the protocol treasury.
4. The discounted protocol tokens are issued to the user based on the vesting period (e.g. 5 days).
5. The Karma Bond service charges a 3.3% fee on the protocol token pay-out.
6. The fee is sent to the Karma Finance Treasury.
7. The 3.3% fee charged by Karma Bond is quoted against a price oracle to determine the fee’s USD value. For every 1 USD worth of fees, 1 [bKARMA](https://karma-finance.gitbook.io/karma-bond-documentation/overview/karma-bond-token-bkarma) is minted. 90% of the [bKARMA](https://karma-finance.gitbook.io/karma-bond-documentation/overview/karma-bond-token-bkarma) minted goes to the user.
8. 10% of the [bKARMA](https://karma-finance.gitbook.io/karma-bond-documentation/overview/karma-bond-token-bkarma) minted goes to the early contributors. 

{% hint style="info" %}
*Example: Julie’s LP tokens generate 30 USD worth of fees for Karma Bond. Julie is rewarded with 27* [*bKARMA*](https://karma-finance.gitbook.io/karma-bond-documentation/overview/karma-bond-token-bkarma) *in addition to the discounted protocol token. The Karma early contributors receive 3* [*bKARMA*](https://karma-finance.gitbook.io/karma-bond-documentation/overview/karma-bond-token-bkarma)*.*
{% endhint %}

![](https://2678592451-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fl08S1ZzVv4LTE4ipcRAg%2Fuploads%2FWfRaOGRhyumUf4Frj1d9%2Fkarma%20bond%20mechanics.png?alt=media\&token=7e7e18b3-3836-4e24-82e2-ed54ab471ce8)