Expired vsBond
Each vsBond represents the redemption time of a parachain, but vsBond itself has an
So don't wait the vsBond to expire and redeem when the announcement is made in our channels!
Why does vsBond expire?
In order to prevent vsBond from being maliciously hoarded, some kind of vsBond may have a single point of control risk, which will adversely affect normal exchange. Therefore, SALP sets an 84-day (Kusama) & 168-day (Polkadot) redemption period for vsBond at the protocol design level, and expired vsBond cannot participate in the redemption, thereby eliminating the motive for malicious hoarding of vsBond.
How to use the expired vsBond?
For the expired vsBond, the Redeem and Order functions are closed. However, users can still use the "Convert" feature to convert expired vsBonds to vsTokens to minimize losses.
Enter bifrost.app and click "Bond" under "Explore more" in the main navigation menu on the left
Switch to the "Convert" page by click on the Convert tab on the top
Select the Expired vsBond you may have in the list by clicking in the dropdown list
Input the amount of vsBond to redeem, click on the "Convert" button and sign the transaction.
Your vsBond will be converted into vsTokens (vsDOT or vsKSM) based on the expired Bond ratio once confirmed.
How much do you lose for an expired vsBond?
If you have 1 vsDOT + 1 vsBond in your wallet, and the vsBond has expired. The redemption steps are:
Convert expired vsBond into vsDOT: the conversion rate is fixed at 1 vsBond : 0.9 vsDOT (refer to the Convert rate matrix in the previous section)
I.e: 1 vsBond is converted into 0.9 vsDOT
You have now 1 vsDOT + 0.9 vsDOT = 1.9 vsDOT
Exchange the remaining vsDOT for DOT for the purpose of DOT redemption.
Suppose the following graph vsDOT/DOT exchange rate is 0.438 as an example, 1.9 vsDOT can be exchanged for 0.833 DOT in the end, resulting in 16.7% loss based on the swap market price
Redemption of expired vsBonds through the Convert ⇒ Swap process will have at least a 5% discount (theoretical price of vsToken is 0.5 Token), and if the vsToken price fluctuates in the market, the discount rate can worsen further. The closer from 0.5 the swap ratio is, the better discount rate you will have.
Therefore, ompleting the redemption before the vsBond expires is the best option.
Bifrost's handling of expired vsBond
Since each expired vsBond corresponds to a vsDOT (vsKSM) that cannot participate in redemption, and vsDOT (vsKSM) will continue to circulate in the market as a homogenized derivative, the unredeemed vsBond will continue to accumulate positions on vsDOT (vsKSM), and indirectly the vsDOT/DOT (vsKSM/KSM) exchange rate creates a sell-off.
Therefore, Bifrost will repurchase 75% unredeemed DOT (KSM) to vsDOT (vsKSM), and destroy vsDOT (vsKSM) to replenish the liquidity of vsDOT/DOT (vsKSM/KSM); the remaining 25% DOT (KSM) will be transfered to Bifrost treasury.
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