This product it part of BitDAO Risk Management system which will include bonds, insurance, secondary markets, etc...
Some AE Mandates will have economic risk to BitDAO, for example an Acquisition AE to purchase nouns at auction may have funds stolen by the AE operator or deal reneged on if the Nouns prices go up a lot.
The Bond mechanic allows for certain Performance Factors of AEs to be guaranteed by a bond which can be slashed by BitDAO bond governors.
This will lead to more experimental ideas to be proposed and funded.
Specific performance factors for the AE may be guaranteed through a bond. If the performance target is not met the bond may be slashed and returned to the BitDAO Treasury. Slashing of bonds can be via BitDAO vote at the start, or by a BitDAO Arbiter Entity, or Arbiter Voter Role in the future. For example:
Bonds will be in the form of BIT and other currencies giving additional use case for BIT. Some AE's have such high risk of rug pull, that the required bond could be 100% of the capital requested from BitDAO (essentially making the AE zero risk for BitDAO)
The AE can incentivize bond providers by providing bond rewards such as economic interest in the AE itself.
This can create a cool mechanic portrayed by the following example: general structure of 100% bond covered AE leads to ~33% ownership of what would have been offered to BitDAO by the AE for funding. BitDAO gets 66% basically free rolling, holders get ownership in the AE and their BIT back if the AE does well to then roll into another AE. Bonder’s are also incentivized to help it do well since they have money at stake and ownership. Even funds or AE partners might OTC or token swap with BitDAO for BIT under this model creating quite a bit of demand rather than contributing cash because they have the option of getting the bond back.