> For the complete documentation index, see [llms.txt](https://quotanetwork.gitbook.io/whitepaper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://quotanetwork.gitbook.io/whitepaper/about-quota/features/lp-token-bond-system.md).

# LP Token Bond System

Bonds are a financial primitive for protocols to acquire assets, including their own liquidity(LP), in exchange for protocol tokens at a discount(10%). In other words, bonds are a pricing mechanism for any two ERC-20 tokens that does not rely on third parties like oracles. Bonds internally respond to supply and demand by offering a variable ROI rate to the market and its users.

Bonds internally respond to supply and demand by offering a variable ROI rate to the market and its users.

**How do both the Treasury and the bonder benefit from the process?**

Bonds are the primary mechanism for Treasury inflows, and thus, the growth of the network.

Bonders commit a capital sum upfront and are promised a fixed return(+10%) at a set point in time; that return is in 4.0V2 tokens and thus the bonder's profit would depend on token price when the bond matures.

If the ROI is positive – a bond can be purchased at a discount to market price) – market participants (bonders) are incentivized to exchange their assets for the token, vested after a cliff period of 3 days. The Treasury sells tokens at a premium to its backing, while the bonder is able to capture a discount (positive ROI) by purchasing the token directly from the Treasury.

**Why Do I Want Bonds?** 

Because it allows you to buy 4.0V2 tokens at a lower cost basis. In return for selling your LP, the protocol will sell you tokens at a (x)% discount.