➤ Bond Buyers

Guide for bond buyers — convertible notes, CDT, NFT options, and the conversion/redemption lifecycle.

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.

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

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

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 — 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.

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

Your Reading Path

1. What is ETH Strategy — the problem and the convertible debt insight

2. Convertible Notes — bonding, pricing, and note structure

3. CDT — the debt token in detail

4. Conversion of Notes — conversion paths and redemption

5. Token Routes — visual flow of tokens through the system

6. Risks — what can go wrong and how it's mitigated