Conversion Mechanism

To gain exposure to protocol overcollateralization, users exchange their DFY stablecoins for DFY+ through the protocol's conversion mechanism. The exchange rate is determined by the current DFY+ price, which reflects the protocol's real-time overcollateralization ratio, with holders automatically receiving their proportional share through progressive token value appreciation. During this exchange, DFY stablecoins are permanently burned while new DFY+ tokens are minted at the current exchange rate.

Each conversion between DFY and DFY+ is subject to a protocol fee of 0.8867% (88.67 basis points). The conversion fee is automatically deducted from the DFY balance during transactions and is permanently burned, reducing the total supply of DFY. This burning mechanism ensures sustainable protocol operations while creating systematic overcollateralization that directly enhances returns for DFY+ holders.

Users can opt to pay exchange fees with BOUND governance tokens to receive a 25% fee reduction, lowering the effective cost to 66 basis points. When fees are paid in BOUND, these tokens are also permanently burned, reducing the BOUND supply. To utilize this discount, users must maintain sufficient BOUND balance in their wallet to cover the protocol fee amount at the time of exchange. This dual-burn mechanism strengthens the overall ecosystem by systematically reducing supply of both protocol tokens while rewarding participants who hold BOUND with discounted access.