Network Bond (Primary Utility)

Objective: bond the value of the market’s network effect to the token's value by requiring the token to be locked within the protocol for the duration of the agent’s utility.

Bonding requires a deposit of BUMP tokens by Takers and Makers at the start of their Term and remains locked in the protocol until the end of the participant’s engagement with the protocol, after which it is returned.

Bonding is a necessary ingredient for creating and sustaining network effects. Network effects are necessary for markets to operate; the greater the network effect, the more efficient the market.

Bonding takes BUMP out of circulation at exactly the rate of demand for using the market. Increased demand for the BUMP token will increase network effects, and increased network effects will increase demand, thus aiding the BUMP ecosystem.

Utility tokens such as these are initially sold as a method to kick-start that network effect. They provide a way for individuals, who buy the token to speculate on the value of a future network effect, to signal the same to others within an ecosystem. This provides the initial value for the token as a proxy for the value of the future utility of the Bumper network. But there needs to be a way of binding the demand for the token with the use of the market and, hence, why Bonding exists.

Once the full market utility starts, the BUMP token continues to co-ordinate possible future participants within the broader market by its price and intrinsic link to the demand and market utility provided through Bonding.

Initially, the protocol Bond will be optional to reduce user friction and improve user adoption in the early stages of the protocol’s uptake. For those interested in continuing to speculate on the future utility of the project, the Bond will be incentivised such that additional BUMP will be returned commensurate with their deposit size along three tiers (see Network Incentive table).