Burning The Bonds

What Happens to The Issued Bonds After They Are Redeemed?

After a bond is redeemed at maturity, it will no longer be valid, and the Redemption DAO needs to remove it from circulation to maintain the integrity of the system. This is accomplished through a process called "burning."

The bondholder will initiate the process by calling the redeem function on the smart contract, which will verify that the bond is valid and has not been previously redeemed. The contract will then calculate the total amount to be paid to the bondholder, which will be the face value of the bond plus the profits earned.

Once the total amount to be paid has been calculated, the smart contract will transfer the funds to the bondholder's wallet. At the same time, the smart contract will burn the redeemed bond. This is achieved through the use of the burn function in the smart contract, which will destroy the token and remove it from circulation.

Burning is done by sending the redeemed bond to a specific address, often referred to as the "burn address." This is an address that is hardcoded into the smart contract and is not associated with any user or organization. Any bonds sent to this address are cannot be accessed by anyone. Any tokens sent to this address are considered "burned" and are removed from circulation permanently.

The burn function works by subtracting the balance of the redeemed bond from the total supply of bonds. This reduces the number of bonds in circulation and ensures that the number of bonds in the pool always matches the number of assets held in the Redemption Treasury. The mechanism behind burning ensures that the supply of bonds is kept in check and prevents the dilution of the value of the bonds.