Contractions & UBOND
$UBOND will only become available in the Pit following epochs in which the Time Weighted Average Price (TWAP) of $UNITE is under peg. This means that $UNITE's price will have had to have been under 1 $ONE per 1 UNITE for the majority of the previous epoch in order to trigger the Pit to "open".
The Pit will always open at the very beginning of a new epoch, and remain open for the entire epoch — the Pit can not and will never open mid-epoch — and during epochs in which the Pit is open, $UNITE will not be printed in the boardroom.
To encourage redemption of $UBOND for $UNITE when $UNITE's TWAP > 1.1, and in order to incentivize users to redeem at a higher price, $UBOND redemption will be more profitable with a higher $UNITE TWAP value. The $UBOND to $UNITE ratio will be 1:R, where R can be calculated in the formula as shown below:
To further illustrate why the longer you hold $UBOND the more profitable it is, let's take an initial $1000 investment into consideration. In this example, say this $1000 is used to buy $UNITE when $UNITE TWAP is 0.95 and then swapped for $UBOND. If these $UBOND are redeemed when: -$UNITE TWAP is 1.5, your investment would now be worth $1421. -$UNITE TWAP is 2, your investment would now be worth $1789. -$UNITE TWAP is 3, your investment would now be worth $2526. -$UNITE TWAP is 5, your investment would now be worth $4000.
There is a balanced state "at peg" when $UNITE's TWAP is between 1.00 and 1.01, and this means there is neither contraction nor inflation.
You can swap it back again when the following two criteria are met:
1: $UNITE TWAP is above peg and
2. There is enough in the treasury to cover it the redemption.
Like anything else in crypto, obtaining $UBOND is not risk-free. Just like in the real world, you are purchasing debt from the protocol with the expectation that you will be redeemed at a premium in the future. To date, this has occurred after all contractions, but past performance does not guarantee the same future outcomes. $UBOND is ideal for those with a medium to long-term time preference, as it incentivizes holding in exchange for potentially extremely lucrative rewards. If you are looking for a quick flip or have short-term time preference, $UBOND may not be the right investment option for you.