Bonding is the process of trading MUTE-ETH LP share to the Mute DAO for MUTE. The protocol quotes an amount of MUTE and a vesting period for the trade. It is important to know: when you purchase a bond, you are selling your LP share/tokens. The Mute DAO compensates you with more Mute than you’d get on the market, but your exposure becomes entirely to Mute and no longer to MUTE-ETH LP.
The purpose of Mute bonds is to increase the amount of Protocol Owned Liquidity via the Mute DAO which increases the revenue towards the treasury and long term liquidity for the protocol. The benefit to bonding allows a user to purchase Mute at a lower cost basis.
Bonds are sold at a first come first serve basis. A bond ROI starts at 0% and increases slowly until it is purchased. Once purchased, the cycle is reset with a new bond and dMute is payed out immediately. The dMute is issued with a 7 day time lock. After 7 days, the dMute can be redeemed for MUTE directly, or re-locked with different parameters.
Learn more about dMute mechanics here.
Exchanging $15k worth of MUTE/ETH LP with a bond that currently has a 15% ROI. Bonding would sell the $15k MUTE/ETH LP tokens to the Mute DAO and in exchange receive dMute tokens with an underlying Mute value of $15k * 1.15 = $17.25k worth at the time the bond was purchased. The dMute is locked for 7 days.