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I wrote a very tl/dr post about this earlier but

selling liquidity to a protocol in exchange for a bond is actually exactly equivalent economically from the protocol’s point of view to the user providing liquidity for the length of the bond in exchange for LP rewards.

More specifically its exactly equivalent to a user setting up an LP position in the given token (lets say starting with Eth and creating an FXS/Eth position), staking for the same length of the bond, receiving the LP rewards, unstaking their liquidity and selling the Eth half of their position for more FXS. If you do the steps you’ll see this is the exact same outcome for the protocol if the user sold their LP position in exchange for FXS minted at a discount.

Think of it this way: say you gave me something, but in return I gave you a coupon that would allow you to reclaim it from me at any point. In what sense would I actually “own” that item that you gave me?

My claim this is the exact same thing that is going on when the protocol “owns” liquidity but in return issues tokens at a discount. The key point is that upon the bond reaching maturity the user has the option to sell their FXS minted at a discount and reclaim the Eth in the LP position they provided to the protocol.

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