Solv Protocol Payout Breakdown for the Convertible Voucher
As the second member of Solv Protocol financial NFT family, Convertible Voucher is a structured product that can be converted into a predetermined number of tokens or stablecoins under certain conditions.
Essentially, it features a flexible payout mechanism based on multiple release parameters including the future trading price of the underlying asset and a bond range. As an asset class, Convertible Voucher allows crypto investors to receive healthy returns on a token in a relatively unstable climate.
Release parameters of the Convertible Voucher
- Maturity Date: the day when interests of a Convertible Voucher are delivered, in UTC.
- Settlement Price: the unit price of the underlying asset, which will affect the amount of payout. It is calculated by taking the average of closing prices of the last seven trading days before the Maturity Date.
- Bond Range: an arbitrary price range set by the issuer that defines the payout mechanism of a Convertible Voucher. Should the Settlement Price fall inside this range, the issuer (usually a project) is obliged to make payments of a fixed amount to the holder, in its native token or stablecoin. Like any price range, a Bond Range is the difference between the highest and lowest prices.
- Face Value (sometimes called Nominal Value): the value of the Convertible Voucher, as displayed on the image file of the Voucher. It’s the amount paid to the holder at maturity, should the Settlement Price fall inside the Bond Range.
- Annual Percentage Rate (APR): the yearly interest earned on a Convertible Voucher (expressed as a percentage), if the Settlement Price is inside the Bond Range.
As discussed in the previous section, when the settlement price falls inside the bond range, the amount paid to the Voucher holder would just be the Voucher’s face value. As figure 2 shows, #30’s value (the blue curve) keeps a steady $1,000 as the settlement price traverses across the $0.50-$1.50 bond range. Assuming the Voucher was purchased at a discount for $800, in 294 days the holder will be offered a full face value profit of $1,000, generating a ROI of 25%.
If the settlement price ends up anywhere over $1.50 (upper bound), the holder receives a fixed payout 666.67 SOLV, generating a ROI of at least 25%. If the settlement price drops below $0.50 (lower bound), the holder receives a fixed payout of 2000 SOLV and a negative ROI.
Convertible Voucher is a new digital asset that allows crypto investors to receive healthy returns on a token. Its unique payout mechanism takes into the account the volatility that currently characterizes DeFi and makes it safe to invest in promising, new projects while retaining strong toleration of risk.
ABOUT Solv Protocol
Solv is a DeFi protocol which has created the first ever vNFT token standard, designed for the future of DeFi & Financial NFT’s
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