Bond Economics

Bonds are the financial foundation of TOC's accountability system. They create skin in the game for resolvers and disputers, ensuring economic incentives align with accurate outcomes.

Three Bond Types

Why Bonds Matter

Bonds solve the "cheap talk" problem in decentralized systems:

• Resolution quality - Proposers only submit answers they're confident in
• Dispute filtering - Higher bond requirement filters frivolous challenges
• Escalation cost - Expensive to challenge TruthKeeper unless truly incorrect
• Economic alignment - Everyone has financial stake in correct outcomes

The 50/50 Slash Mechanism

When bonds are slashed, they're split evenly:

Why 50/50?

• Winner incentive - Makes it profitable to catch incorrect resolutions
• Protocol sustainability - Provides revenue for ongoing development
• Collusion prevention - No way to extract value through coordinated disputes
• Simplicity - Easy to understand and predict outcomes

Bond Flow Scenarios

Scenario 1: No Dispute

Scenario 2: Dispute Upheld (Disputer Wins)

Scenario 3: Dispute Rejected (Proposer Wins)

Scenario 4: POP Cancelled

Bond Requirements

Minimum Amounts

The protocol sets minimum bond amounts for each type. These can be configured per token:

// Admin configures acceptable bonds
registry.addAcceptableResolutionBond(
    address(0),  // ETH
    0.1 ether   // minimum amount
);

registry.addAcceptableDisputeBond(
    address(0),
    0.15 ether  // must exceed resolution bond
);

registry.addAcceptableEscalationBond(
    address(0),
    0.25 ether  // higher for Round 2
);

Supported Tokens

• Native ETH - address(0)
• ERC20 tokens - Stablecoins, governance tokens, etc.

POPs can accept bonds in any configured token. The token used for resolution bond determines the token for the entire dispute chain.

Bond-Free Resolution

If both dispute windows are set to 0, no bond is required:

// Create undisputable POP - no bond needed
registry.createPOP(
    resolver,
    templateId,
    payload,
    0,  // disputeWindow = 0
    0,  // postResolutionWindow = 0
    0,  // truthKeeperWindow (unused)
    0,  // escalationWindow (unused)
    address(0)  // no TruthKeeper needed
);

Escalation Bond Mechanics

Round 2 escalation has higher stakes:

• Escalation bond must exceed both Round 1 bonds
• Challenger risks losing escalation bond if admin rejects challenge
• If challenge succeeds, challenger receives 50% of opponent's Round 1 bond

This creates a filtering effect - only serious challenges make it to admin review.

Multi-Token Support

TOC supports multiple tokens for bonds, providing flexibility:

// Resolve with ETH bond
registry.resolvePOP{value: 0.1 ether}(
    popId,
    proposedResult,
    address(0),  // ETH
    0.1 ether
);

// Or with ERC20 (requires approval first)
usdc.approve(address(registry), 100e6);
registry.resolvePOP(
    popId,
    proposedResult,
    address(usdc),  // USDC
    100e6           // 100 USDC
);

Economic Guarantees

The bond system provides several guarantees:

• Non-negative expected value for honest actors - Correct resolutions keep their bond
• Negative expected value for dishonest actors - Incorrect resolutions lose bonds
• Profitable dispute filing - 50% reward makes catching errors worthwhile
• Protocol sustainability - 50% fee ensures ongoing development