Proposal: Gradual Redemption Mechanism for SBOND Holders Using veAERO Yield

Background

Author: Matt3214 Date: May 28, 2025 Discussion Venue: Make Fun Discord The veAERO NFT currently generates approximately $30,000 per month in rewards and has an estimated market value of $800,000. Meanwhile, the total outstanding debt represented by SBOND tokens is $21,026,049.59, with each SBOND representing $1 of debt.

There is already over $200,000 in unclaimed rewards available for distribution.

Rather than pursuing a full liquidation of the veAERO NFT—which would likely require a ~20% discount to fair market value and would prevent partial liquidations—we propose a sustainable and dynamic redemption mechanism that allows us to gradually repay SBOND holders using the yield generated by the NFT.

Objective

To create a fair, flexible, and sustainable path to repay SBOND holders over time, while rewarding long-term participants and enabling early exits without damaging the underlying value.

Mechanism Overview

We have deployed a smart contract that allows for periodic USDC deposits from rewards, and enables SBOND holders to redeem their tokens at a fixed, gradually increasing rate.

Initial Redemption Price: $0.04 per SBOND (reflecting the approximate value if we sold all assets today).

SBOND holders can redeem any portion of their holdings at this rate, with redemptions automatically burning the redeemed SBONDs.

• Example: Depositing $230,000 in rewards at $0.04 per SBOND would burn approximately $5.75 million in debt (~25%).

Each additional $30,000/month in yield, at this rate, would burn $750,000 in debt (~3.5%).

Dynamic Price Adjustment

The redemption price can increase over time based on demand:

If there is no redemption activity at $0.04, the price can be incremented (e.g., to $0.05, $0.06, etc.).

This structure ensures that patient holders are rewarded with higher redemption rates, while those who wish to exit early can do so.

Ultimately, as rewards continue to accumulate and SBONDs are redeemed and burned, the redemption price will approach full debt coverage—either gradually through yield or faster if additional capital enters the system.

Why This Is Preferable to Full Liquidation

• Higher overall value: A fire-sale of the NFT would likely net ~$800,000, resulting in approximately $0.04 per SBOND for all holders—at most.

• No partial liquidation: Selling the NFT prevents the flexibility of phased repayment.

• Voluntary redemption: This approach gives holders the choice of early exit or waiting for better rates.

Key Benefits

• Fairness: Every holder can redeem based on their own timing and risk preference.

• Optionality: Redeem part or all of your SBONDs at any time.

• Incentivized patience: Longer-term participants benefit from higher redemption rates.

• Preservation of value: Keeps the veAERO NFT earning yield for the benefit of all holders instead of selling at a discount.

The Vote

Vote duration: 1 week, starting May 28, 2025 Vote type: ERC20 Balance Vote token: SBOND (Sonne Bond Token) Quorum: 500,000 SBOND

Vote Options:

• For : Approve the proposal
• Dissolve : Dissolve the treasury and distribute the assets pro-rata to SBOND holders.
• Abstain : Wait for a better proposal.

Conclusion

Selling the NFT today caps the upside and guarantees a significant haircut for all holders. Instead, this dynamic redemption mechanism allows the community to extract maximum long-term value from the yield, ensure fair participation, and align incentives across all SBOND holders.

The author believes this is the most equitable and strategic path forward.