Frequently Asked Questions
Bonq is a self-sovereign DeFi (decentralized finance) platform that enables web3 protocols and projects to generate deep, protocol-owned liquidity (POL) at a very low cost. Additionally, it provides users with the ability to generate low-risk, sustainable yields. Bonq is operated by Bonq DAO, a non-profit decentralized autonomous organization that built, launched, and governs the platform.
In the context of finance, “self-sovereign” means that Bonq users don’t need any 3rd party to provide any external assets/capital or to provide any approvals. They use their own assets to mint liquidity (BEUR) in a completely decentralized, non-custodial, and permissionless way, so no 3rd party, even Bonq DAO, can interfere with this process. Also, each user manages their assets and liabilities completely independently from other users and Bonq DAO, as there is no combined “protocol treasury” to manage.
Thanks to its zero-interest protocol, Bonq solves the problem of liquidity for all web3 protocols and projects that have a native token. Additionally, the platform solves the problem of accessing the liquidity of crypto assets at low costs and providing low-risk capital allocation options that provide sustainable yields for end users. The lack of liquidity and no sustainable, real yield options are both one of the biggest DeFi problems today.
Many predict that in the future DeFi will eat all real-world assets (RWA). When this happens, each of the tokenized RWA will need liquidity and the ability to generate sustainable yields for its holders. Both needs will be fulfilled by Bonq because the platform can whitelist the long tail of assets thanks to its formalized, data-driven risk model.
The Bonq platform consists of
1) a formalized, data-driven risk model,
2) a zero-interest, permissionless, non-custodial lending protocol, and
3) BEUR, an over-collateralized, non-custodial stablecoin.
The risk model determines which 3rd party token can be used as collateral for the lending protocol and informs the lending parameters like the required collateral ratio, borrowing limits, and redemption fees.
The lending protocol allows users to create troves, deposit whitelisted 3rd party tokens as collateral, and mint BEUR loans at zero interest. The protocol also allows users to stake BEUR into the Stability Pool (SP), which is used for automated liquidations and arbitrage. SP makes sure BEUR is pegged to EUR and provides low-risk, sustainable yield options for the end user. BEUR allows protocols to generate POL and generate trading fees at zero interest and without selling their native tokens. End users can hold BEUR to diversify their portfolio, have EUR exposure, and stake into SP. More about the Bonq platform can be found in the doc section here.
End users can interact with Bonq through the Bonq user interface (UI) or directly with the smart contract on the blockchain. Additionally, they will be able to use bots (services continually running in the background) to automate a lot of operations, like managing the collateral ratio of their troves, taking advantage of arbitrage opportunities, or withdrawing rewards from SP.
Bonq Utility Token (BNQ) is a pre-minted, fixed supply token. There will only ever be 1,000,000,000 (1 billion) BNQ created and circulating. The total supply is allocated based on its purpose to the following categories:
- Early investors - 10% of the total supply
- Founders -12%
- Impact grants and investments - 5%
- Community rewards and incentives - 50%
- Late investors and BonqDAO treasury - 23%
BNQ is distributed gradually over time. Early investors, founders, and contributors will receive their tokens subject to vesting and lockup schedules. The lockup lasts for 3 months after the token generation event and then tokens are unlocked daily over the next 3 years. Community rewards, including both SP staking rewards and liquidity mining rewards, are distributed daily.
- 1.BNQ is needed for whitelisting new tokens as collateral
- 2.BNQ stakers receive all the fees from the protocol
- 3.The fees are paid to BNQ stakes as cash backs, not “dividends”, so stakers need to use the platform to benefit from the fees
- 4.Cashbacks can be used to repay your BEUR debt in your trove
BNQ can be used inside the protocol by both individual users and protocols/projects that have their own native tokens. Individuals stake BNQ to receive a part of all the fees collected by the Bonq platform. The fees are allocated proportionately to the BNQ stake and are distributed as cashbacks and not as dividends. It means that users need to interact with the platform and pay fees to benefit from the cashbacks. The cashbacks can be used to cover the BEUR borrowing fees, the fees for premium services, and to pay back BEUR debt in troves. But, it’s impossible to receive any cashbacks just by staking BNQ without using the platform. The cashbacks are automatically calculated and distributed by the Bonq protocol smart contracts.
Additionally, users can stake a specific number of BNQ to receive a share of the redemption fee that is charged when their trove is redeemed. (Read more about the redemption here) This way, their collateral is redeemed at a premium (the equivalent of selling it at a market price plus a share of the redemption fees). Users can then buy the collateral back and mint BEUR and generate a profit.
Protocols that want to list their native tokens as Bonq collateral have to buy and stake BNQ. The BNQ remains staked as long as there are active troves still using the whitelisted token as collateral. The number of BNQ required to whitelist a token is governed by Bonq DAO and is a part of the whitelisting criteria checklist.
BNQ demand will come from end users who want to offset Bonq fees, automatically repay their BEUR debt, and hedge against redemptions. The demand from web3 protocols will be driven by the ability to whitelist their native tokens to create deep, protocol-owned liquidity for their token.
BNQ is the native utility and governance token of the Bonq protocol, which provides several interrelated functions. The token can be used in many ways and incentivizes users to hold and stake BNQ:
- The BNQ token provides free or discounted access to the Bonq platform and its different services. Users who stake BNQ will receive cashback which can be used to offset service fees.
- BNQ enables projects and communities to whitelist their native token so that it can be utilized as collateral for loans. Projects have to stake BNQ to participate in this.
- Holders who have taken out loans on Bonq can use BNQ to repay their BEUR using the cashback mechanism automatically.
- Users will receive a share of the redemption fees when BEUR is redeemed against collateral.
- The token will also enable the token holder to participate in the BonqDAO governance process.
Bonq EUR (BEUR) is a variable supply token. It is created by individual users minting BEUR loans and it’s removed from circulation (burnt) when users repay their loan or redeem BEUR for the collateral assets. The supply of BEUR will always closely match the demand for BEUR, creating a situation where its price closely follows EUR.
When new BEUR is minted by the users, the platform charges a borrowing fee of 0.5% (half a percent). In a situation when the demand for BEUR is lower, and the price of BEUR moves below 1 EUR, the borrowing fee is increased, to curb the supply and bring its price back to 1 EUR. When the demand for BEUR is lower and the BEUR price is below 1EUR more redemptions are expected. Therefore, the Bonq platform monitors the amount of BEUR redemptions and increases the borrowing fee if the redemptions go up.
It should be pointed out that the supply of BEUR is completely decentralized and independent of the Bonq DAO or any other entity. Minting and burning on BEUR happen in the individual troves of Bonq users, and only they can control the troves and the number of BEUR being minted and burnet in their troves.
Is BEUR just another algorithmic stable coin and subject to the same risks as Luna and another algorithmic stable coin?
Bonq uses external collateral for $BEUR, so the value is anchored in external assets that have their own market value and price. Bonq utility token $BNQ is not used as collateral. Luna was protocol’s internal asset, so the whole system was self-referential and pro-cyclical.
Additionally, Bonq uses may assets as collateral and troves for each asset type are segregated, so liquidations of one asset type won’t spill over other trove types
Finally, our protocol is designed to self-recover in the event of a cataclysmic market event. Even if the entire collateral in all troves loses 99% of its value and BEUR loses its peg, it will recover thanks to the redemption mechanism we have in place.
Bonq have no Treasury.
Only users with their own Trove's where Bonq have no access to them!
There are multiple lending protocols in the DeFi space, the most known are AAVE, Compound, Liquity, Convex, and much more, how would you compare with them, and what would be your competitive advantage?
Besides 0% lending, Bonq’s true power comes from unique features such as automated bots, automated liquidation, and a responsible Risk Management system that we just implemented. In our view, the risk model is going to be the backbone of Bonq’s long-term success. Because it would allow us to be different from all the other lending protocols and accept a wide range of collateral assets without adding stress to the overall lending protocol. Keep in mind that Whitelisted tokens on the Bonq platform could affect the protocol and its stable coin BEUR at its core so it is crucial to building a robust and systematic risk model.
BEUR is obviously needed. Without an over-collateralized, non-custodial stable coin there is no Bonq platform. Relying on external sources of liquidity and capital, for example using a fiat-backed stablecoin, would mean that the platform has to charge recurring interest and is dependent on 3rd parties who provide capital, so it’s not permissionless or non-custodial anymore.
BNQ is needed to provide customizable, permissionless access to the Bonq platform for both end users and projects who want to whitelist their tokens and be a part of the Bonq DAO. Additionally, BNQ is used to facilitate adoption and orchestrate incentives in the ecosystem.
Without BNQ there can be no Bonq DAO, that is operating not for profit. Instead, there would have to exist a for-profit web2-style corporate entity that would maximize value extraction from the platform and the ecosystem.
Individuals stake BNQ within Bonq app to receive a part of all the fees collected by the Bonq platform. The fees are allocated proportionately to the BNQ stake and are distributed as cashbacks and not as dividends. It means that users need to interact with the platform and pay fees to benefit from the cashbacks.
The cashbacks can be used to cover:
- BEUR borrowing fees,
- the fees for premium services, and
- to pay back BEUR debt in troves with the lowest collateral ration (Trove closest to liquidation)
But, it’s impossible to receive any cashbacks just by staking BNQ without using the platform. The cashbacks are automatically calculated and distributed by the Bonq protocol smart contracts.
Unlike the other lending platforms, Bonq provides self-sovereign liquidity. This means that users don’t need to borrow external capital from any 3rd party and pay recurring interest. Bonq helps them access the liquidity of their own assets, in a non-custodian, permission-less way. Bonq uses BEUR, our native, over-collateralized stable coin backed by on-chain assets.
We have deeply explained BEUR price stability analysis under different market conditions in this article.
How does Bonq compute over-collateralization ratio? Does it include proper risk management and prevent the users from being liquidated?
Bonq protocol is completely non-custodial, we don’t have a treasury, so there’s no risk of running out of any treasury that is supposed to keep the peg.
The price of the collateral is provided by an oracle, Chainlink for USDC, or Tellor for ALBT. We can't influence that the collateralization ratio is Price in EUR * Collateral / BEUR. If you deposit 1000 USDC worth 0.9 EUR = 900 EUR of collateral and you have 450 BEUR of debt. The TCR (Trove Collateralisation Ratio) is 200%.
Whitelisted tokens on the Bonq platform could affect the protocol and its payment coin BEUR at its core, so it is crucial to build a robust and systematic risk model.
Bonq DAO relies on these underlying factors to assess a protocol’s creditworthiness and decides if a token can get whitelisted as collateral.
Mandatory Whitelisting Requirements:
- The token must be TRADING and have a live USD or EUR price feed
- Minimum of 6 months of trading history
- Listed on at least 3 exchanges/market/pools on Coingecko or CoinMarketCap
- Minimum daily volume > $500,000
- Total MarketCap > $25 million
- Fully Dilutive Value < 3 * Total Market Cap Public
- Code repository that was audited by a specialized 3rd Party
- The token has to trade on the chain where Bonq is deployed
Bonq will provide its users with bots (services that run automatically in the background) and assist with managing troves and interacting with the ecosystem.
We even gave bot a name "Owen the accountant"
The Bots will be offered in a package to users as premium services
Users, who subscribe to premium services will have the fee automatically charged to their chosen trove. Users who stake BNQ in the cashback pool will be able to (at least partially)offset these fees.
How it works:
- Select a Trove that has a CR higher than the desired Maximum Target Ratio (MaxTR)
- Authorize the bot to create a Trove Optimization smart contract and grants it access to a trove.
- The user sets the parameters for the optimization:
- MaxTR and a Minimum Target Ratio (MinTR)
- % of BEUR to be used in the Stability Pool
- % of BEUR and collateral to be used in the Swap Pool
- The bot calls the Borrow to Target function on the smart contract which causes the smart contract to increase the debt to lower the CR to the MaxTR
- Transfer the desired portion to the Stability Pool
- Transfer the desired portion (and a portion of the collateral) to the Swap Pool
As long as the Trove CR remains in between the MinTR and MaxTR, nothing happens.
If the value of the collateral increases above the target, additional debt is minted and distributed.
If the value of the collateral decreases so much that the CR falls below the MinTR, the funds allocated to the Stability Pool and Swap Pool are withdrawn and used to repay enough of the debt to get to the MaxTR.
Additionally, the optimization bot will make sure that in case of participating in the Stability Pool liquidations, the collateral rewards are swapped for BEUR right away and the resulting BEUR is reallocated to the Stability and Swap Pools. The user can exclude some of the collateral tokens from the automatic swap if they wish. But this increases the risk that there will not be sufficient funds to repay the debt when the MinTR limit is hit.
$BNQ utility token is pre-minted on ETH chain with fixed supply of 1B tokens.
BNQ token release schedule:
Keep in mind the numbers are for December of each year, so the first data point is for Dec 2023. By the end of January 2023 the circulating supply will be around 50 million BNQ.
Here you can deep dive further in Bonq token econimics.
Last modified 2mo ago