What is bonding and POL?

What is bonding?

Bonding is a mechanism where a user can sell liquidity pool tokens to a protocol in exchange for its native token through what we call a bond.

To incentivize users to sell liquidity pool tokens to the protocol, rather than the open market, bonds are offered at a market discount. Bonds have a vesting period of 5 days to prevent users from selling all the discounted tokens for a quick profit.

What is POL?

Protocol owned liquidity (POL) is an essential part of DeFi as it guarantees users that there will be sufficient and sustainable liquidity in token pools.

POL transforms liquidity from a liability to a revenue source. Token swaps using liquidity pools can generate fees depending on the protocol, which can then be distributed to the holders of the governance token. A protocol that uses Karma Bond will become a liquidity provider itself as well as a governance token holder. They will also receive a share of the generated fees.