⚙️$BONZO Utility

The Bonzo Finance protocol’s native $BONZO token will possess, but is not limited to, the following utility:

Utility	Description
DAO Governance	The Bonzo Finance DAO, set to launch in 2025, will provide $BONZO token holders with the ability to both write proposals and vote on features, updates, and changes to the Bonzo Finance protocol. The Bonzo Finance DAO ensures decentralization of the Bonzo Finance protocol and offers utility to $BONZO token holders.
Safety Module	The Bonzo Finance safety module acts as a reserve to ensure the protocol's stability and protect lenders from potential losses in the case of a shortfall event. $BONZO token holders receive an APY reward for locking up tokens to the Safety Module, further adding to this reserve pool. On a long-term timeline, a portion of protocol fees will be utilized to continue rewarding users who participate in this activity.

🦺 Safety Module | Defined & Explained

The Safety Module (SM) in Bonzo Finance, inherited from the Aave v2 codebase, serves as a reserve to ensure the protocol's stability and protect lenders from potential losses. The primary mechanism for securing the Bonzo Finance Protocol involves incentivizing $BONZO holders to lock their tokens into a smart contract-based component called the Safety Module. In the event of a Shortfall Event, which occurs when there is a deficit within the liquidity markets of the Bonzo Finance ecosystem, the locked $BONZO will be used to mitigate the deficit.

During a Shortfall Event, a portion of the locked $BONZO is auctioned on the market and sold against the assets needed to cover the deficit. The SM includes a built-in backstop mechanism to prevent an excessive influx of $BONZO into the open market, which could further reduce the value of $BONZO. Participants who choose to lock their $BONZO into the SM accept the potential risk of a Shortfall Event in exchange for receiving rewards in the form of Safety Incentives (SI).

To contribute to the protocol's safety and receive incentives, $BONZO holders deposit their tokens into the SM and receive a tokenized position that can be freely moved within the underlying network. The holder of the tokenized position can redeem their share from the SM at any time, triggering a one-week cooldown period, which can be extended by Bonzo DAO governance.

SI rewards are subject to a seven-day cooldown period during which tokens are unclaimable. However, fees generated by the protocol are continuously allocated to users participating in the SM and can be withdrawn. These fees are redistributed to SI participants. The reward plan for the SI is designed to incentivize participants who contribute to the protocol's safety in its early stages. The SI emission will be controlled by governance and adjusted according to the protocol's needs. It is important to note that all fee distribution mechanisms are potential and subject to the AIP process and governance vote.