Bonded assets, otherwise known as ‘bAssets' are defined as “liquid, tokenized representations of staked (bonded) assets in a proof-of-stake (PoS) blockchain.” Essentially, in instances where staking rewards are distributed to the holders, bonded asset tokens represent a unit of ownership that a staker has in their underlying staked asset position.
Although bonded assets have a variety of characteristics when implemented for different uses, there are a few key attributes bAssets should include to be considered ‘ideal’. Those characteristics are as follows: fungibility, ease of redemption and default one-on-one conversion. Regardless of any underlying validators and their properties, bonded assets ideally are made to be fungible covering all staking positions. It is vital that each unit of bonded assets have the same risk and reward in order to mitigate instances of broken up liquidity.
For smooth transactions between primary and secondary markets, it is of utmost importance that bonded asset redemption is all but seemingless. The redemption of bAssets should be executed within a fixed time period and it should be understood that any holder should be able to redeem their bAssets without substantial loss. Lastly, the underlying price of bonded assets should be easy to estimate ideally by using a one to one conversion between the bonded asset itself and its underlying assets (assuming the bonded asset copies the price of its underlying asset).
Now, we march forward with our newfound understanding of bonded assets! Let’s dive into today’s topic! What exactly is the difference between bonded Luna and bonded ETH?
Let’s start with bonded Luna, or bLuna. bLuna tokens are bonded assets that are backed by their underlying Luna delegation. What’s most interesting here is that bLuna tokens are in full compliance with the CW20 standard and have the ability to be integrated into a variety of DeFi applications. Bonded Luna tokens amass TerraUSD rewards. These rewards are created from the underlying Luna delegations tied to the bonded Luna tokens and the TerraUSD is distributed to bLuna holders on a pro-rata basis.
Okay, cool! We now know what bLuna tokens are. What is bonded ETH?!
Bonded ETH, otherwise known as bETH are ‘wrapped tokens of Lido Finance's staked ETH (stETH)’.These bonded assets are backed by Ethereum 2.0 staking positions and exist on both the Ethereum and Terra blockchain. Also, bETH tokens comply with both the ERC20 standard and the CW20 standard and are used as a security for borrowing Terra stablecoins. Like bLuna tokens, bETH tokens also amass TerraUSD rewards. Around the clock, approximately every 24 hours or so, Ethereum staking rewards are sold for UST, the UST is then transferred over to TerraUSD and eventually distributed to the holders of bETH. However, please note, only bETH tokens that lie on the Terra blockchain can accrue TerraUSD rewards.
All in all, in all its variations, bonded asset tokens essentially are a holder’s right of the underlying staked asset position, with staking rewards being distributed to the various holders. Bonded assets have the ability to distribute rewards which is a huge point in boosting mass adoption. Let us know if you would like to know more about bAssets!