ABI-DAI LP Bonds: What, How, Why?

Abachi.io
5 min readFeb 22, 2022

If you’re already familiar with the process, but unclear why should one bond the LP tokens into Abachi, you can skip right to The Why? section at the end.

The What?

ABI-DAI LP stands for ABI + DAI liquidity pool pair. If you’re not familiar with liquidity pairs, they are the most fundamental building blocks of how decentralized finance (or DeFi as we affectionately know it) works. Liquidity pools are created with a certain exchange, and allow you to swap one token for the other. In our particular case, the ABI-DAI liquidity pair on Sushi Swap will allow users to pay in DAI and get ABI, or vice versa. This makes sure that you can buy or sell your required token at any time without having to wait for another customer to show up willing to sell your required tokens, at your desired price.

The How?

The process may look scary, but in reality its rather straight-forward.

Make sure you are on the polygon network.

Step 1: You’ll need to have ABI and DAI tokens in equal values. At the time of this writing, the ABI token is trading at 14.5 DAI per ABI. So in order to create the liquidity pair (or LP for short) you’ll need 1 ABI and 14.5 DAI.

Step 2: Head on over to app.sushi.com/add/ where you will see something like this.

Step 3: Select ABI and DAI in each of the input fields and enter the quantities you wish to add to this liquidity pool. Once you input quantity in one field, it will automatically fill in the proportional quantity in the other.

If you do not see ABI as an option, you can use this link. It will take you directly to the liquidity pool.
https://app.sushi.com/add/0x6d5f5317308C6fE7D6CE16930353a8Dfd92Ba4D7/0x8f3Cf7ad23Cd3CaDbD9735AFf958023239c6A063

Hit the Confirm Adding Liquidity button below and approve the transaction. It will show you a summary screen showing you the quantity of the ABI-DAI pool tokens you will receive.

Once the transaction is processed, you will now have some ABI-DAI LP tokens in your wallet. This token is essentially a receipt of your contribution to this particular pool, and the ABI-DAI LP bonds are issued against this receipt token.

Step 4: Head on over to app.abachi.io and click on the Bond button in the ABI-DAI LP row.

As is customary, the app will ask you to approve the access to ABI-DAI LP tokens in your wallet. Click on the Approve button and approve the Metamask transaction. You might need to refresh the page once the transaction is processed if the screen doesn’t update by itself. Now you can see the deal that you will be getting:

Some key values and their explanations below:

Market Price: This is the current market value of 1 ABI if you were to go buy one from Sushi. And yes, that ABI would have come from the same liquidity pool to which you just contributed :)

Bond Price: This is the rate at which you’re buying the new ABI bonds. At the time of this writing, the market price of ABI is below the offered bond price, so its not profitable to bond ABI at the moment, but this may not always be the case, and you can (and should) come back & bond when the Bond price is lower than the Market price.

Your Balance: Well, your current ABI-DAI LP balance.

ROI: This is the return on your bonding investment you can expect. At this time, this is -14.91% which is not good obviously, but let’s ignore it for the moment.

You Will Get: At the time of creating the LP token example, we put up assets worth exactly 2 ABI (1 ABI, and 14.5 DAI which was the ABI price at the time). Since the ROI is -14.91%, this means that we will be getting only 1.6962 ABI if we bond here. Ideally, we want this value to be more than 2 ABI for it to be a profitable trade.

Vesting Term: This is the duration for which your 1.6962 ABI tokens will be linearly vested. Meaning they will be unlocked bit by bit every minute or so until all of 1.6962 ABI tokens have been fully unlocked for you to redeem.

Alright, let’s hit that Bond button, approve the transaction, and see what happens.

Once you refresh the page, you will see a new section above the Bonds card showing the status of your bond.

You can now see that there’s already a little bit of Claimable ABI available. You can redeem the Claimable ABI and stake them right away to start earning rebases.

The Why?

Well, for a number of great reasons:

  • Once the ABI market price goes back above the bond price, you will be able to buy more ABI at a great discount.
  • Bonding LP tokens provides deeper liquidity in the pool and creates more price stability for transactions. As a result, large buy/sell orders have lesser price impact. Users will face less slippage if they place a large order, and holders will see smaller red candles if someone dumps a large quantity of tokens into the market.

The pool analogy is a great way to visualize & understand this. If you jump into a bath tub, the water (token price in our case) will go all over the place. But if you jump in an olympic size swimming pool, people on the other end may not even notice you’re there.

  • By bonding liquidity into the protocol, you allow Abachi to earn profits off transaction fees from within that pool, which is a good revenue source for Abachi Treasury. This makes the protocol stronger and increases the backing value of the ABI tokens you hold, thereby making your investment go up in value.

As always, our team of Professors, Moderators and Founders are always at the ready in our Discord in case you have a “Wait, but why…” moment. They really enjoy answering complex questions, so you’ll really make their day by asking them good questions.

Happy bonding!

--

--