# ➤ Bond Buyers

You want USD-denominated positions with conversion optionality — the debt side of ETH Strategy. You purchase a convertible note (paying with ETH) and receive composable tokens that give you multiple exit paths over a multi-year window.

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## What You Receive

When you purchase a convertible note, the protocol gives you two separate tokens:

1. **CDT (Convertible Debt Token)** — fungible ERC-20 where each token represents \~$1 of protocol debt. Tradable, usable as collateral, composable.
2. **Option NFT** — an ERC-721 encoding your conversion rights: how much STRAT and esETH you can claim, subject to a \~6.9-day timelock and \~4.2-year expiry.

These tokens are independent. You can sell CDT and keep the NFT, or vice versa. But to exercise conversion, you need both — burning CDT against the NFT.

**Deep dive:** [Convertible Notes](https://docs.ethstrat.xyz/core-mechanics/convertible-notes)

## Lifecycle of a Convertible

### 1. Timelock (\~6.9 days)

After bonding, you wait. No conversion or redemption yet. But you can still transfer the NFT or trade CDT.

### 2. Conversion Window (after timelock, before expiry)

This is your core holding period — up to \~4.2 years of flexibility:

* **Convert to STRAT** — burn CDT, receive newly minted STRAT. You're betting STRAT appreciates above the conversion rate.
* **Convert to esETH** — burn CDT, receive esETH directly. You're exiting into ETH.
* **Partial exercise** — burn some CDT, keep the rest. The NFT tracks remaining balances.
* **Hold** — wait for better conditions, trade CDT or the NFT on secondary markets.

### 3. Post-Expiry Redemption (after \~4.2 years)

Conversion closes. Remaining CDT redeems for USD notional value paid in esETH:

* **Protocol solvent:** full USD notional at current ETH/USD price
* **Protocol underwater:** pro-rata share of total treasury (less than face value, but pari passu with all CDT holders)

**Deep dive:** [Conversion of Notes](https://docs.ethstrat.xyz/core-mechanics/conversion-of-notes)

## Why This Structure

The conversion option is valuable. In TradFi, convertible bond issuers pay interest to compensate lenders. Here, the option *is* the compensation — the protocol borrows at 0% interest because the conversion rights are worth more than a coupon.

Your position has asymmetric upside: if STRAT appreciates, your conversion rights become increasingly valuable. If it doesn't, you still hold CDT backed by the protocol's treasury, redeemable at expiry.

**Deep dive:** [MSTR Comparison](https://docs.ethstrat.xyz/tokenomics/mstr-comparison) — how this maps to MicroStrategy's convertible debt model

## Conversion Pricing

Your conversion entitlements are set at bonding time, determined by:

* **Premium Control Factor (PCF)** — scales the premium based on outstanding CDT
* **GAV Control Factor (GCF)** — scales the protocol's gross asset value

Higher GAV or CDT supply means a higher conversion rate (fewer tokens per bond). The formula and a worked example are in [Pricing Conversion Entitlements](https://docs.ethstrat.xyz/core-mechanics/convertible-notes#conversion-entitlement-pricing).

## Key Risks

* Conversion rights have a fixed expiry (\~4.2 years) — if STRAT doesn't appreciate, conversion to STRAT may not be profitable
* Redemption is pro-rata if the protocol is underwater — you may receive less than face value
* CDT price on secondary markets may trade below $1 if the market prices default risk
* The timelock (\~6.9 days) means you cannot immediately react to price movements after bonding
* Smart contract risk across the bonding, conversion, and esETH contracts

**Full breakdown:** [Risks](https://docs.ethstrat.xyz/security-and-risk/risks)

## Your Reading Path

1. [What is ETH Strategy](https://docs.ethstrat.xyz/introduction/what-is-eth-strategy) — the problem and the convertible debt insight
2. [Convertible Notes](https://docs.ethstrat.xyz/core-mechanics/convertible-notes) — bonding, pricing, and note structure
3. [CDT](https://docs.ethstrat.xyz/core-mechanics/cdt) — the debt token in detail
4. [Conversion of Notes](https://docs.ethstrat.xyz/core-mechanics/conversion-of-notes) — conversion paths and redemption
5. [Token Routes](https://docs.ethstrat.xyz/introduction/token-routes) — visual flow of tokens through the system
6. [Risks](https://docs.ethstrat.xyz/security-and-risk/risks) — what can go wrong and how it's mitigated