Conversion of Notes

Convertible note conversion depends on whether the Option NFT is before or after expiry.

  1. Before Expiry:

    1. Bonders deposit NFT and CDT, receive STRAT according to the STRAT/CDT price encoded on the Option NFT

    2. Protocol burns NFT and CDT and issues STRAT

  2. After Expiry:

    1. Bonders deposit NFT and CDT, receive USD value of their note

    2. Protocol burns NFT and CDT and pays USD out of treasury

In every Option NFT there is 3 unique values:

  • Expiry Date – Every option expires 4.2 years from its minting date.

  • Strike Price – Determined using the long bond formula, expressed as a STRAT/CDT price.

  • CDT Amount – Represents the USD value bonded into the protocol to acquire the convertible note linked to the option NFT. e.g. if you bond $10,000 USD, you receive 10,000 CDT + Option NFT with a 4.2 year expiry, a strike price and a 10,000 CDT value.

Partial Option Exercise Mechanism

For example, if an option has a value of 10,000 CDT, a user may choose to exercise 3,000 CDT. In this case:

  • 3,000 CDT is burned.

  • 30% of the corresponding STRAT is issued to the user.

  • The user receives a new option NFT with a remaining value of 7,000 CDT, allowing the remaining portion to be exercised at a later time.

This mechanism enables flexible, partial option exercises while maintaining the integrity of the overall system.

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