# Recovery Phase and Bond Issuance

During the recovery phase, when the price of NUSD falls below $0.90, we initiate a mechanism of bond issuance to stabilize the system.

The process of bond issuance involves burning NUSD, thereby constricting its supply. Bonds are issued at a discount that starts at 5% and increases by 2% for every $0.10 drop in price. For instance, if the price is $0.89, bonds will be issued at around $0.845, and if the price reaches $0.60, bonds will be issued at roughly $0.558.

When bonds are issued, the discount is redeemed in minted NSH at the time of bonding. This ensures that there is no additional strain on NUSD as it returns to the peg. The minted NSH will be locked until NUSD reaches $1.03, at which point it can be redeemed.

Once the price of NUSD recovers to $1.03, bondholders may redeem their bonds for NUSD on a first-come-first-served basis. The redemption process burns the bonds and mints NUSD. It's important to note that these bonds do not have any secondary value on exchanges.

In a scenario where bondholders wish to exit early, they may redeem their bonds at any time when the price is above $0.95. However, this early redemption will be in the form of NSH and will forfeit any discounts previously issued.

During the recovery phase, Buy/Sell/Tx fees are used to buy back and burn NUSD. Members of the Nebulous Conclave can use their rewards to purchase bonds directly at a deeper discount without incurring a lock penalty. A 10% non-penalized tax is taken from bonding, which is swapped in the Stability Pool for NSH and rewarded to Conclave stakers. Once NUSD returns to $1.03, the swapped NUSD is used to buy back and burn NSH.

In periods of extended recovery, we may also decide to utilize a portion of the Stability Pool to buy back and burn NUSD to further assist in the recovery process.

As the system progresses and the collateralization ratio increases, the ecosystem becomes increasingly stable. Once the collateralization reaches over 110%, we have a sufficient buffer to back the price of NUSD, ensuring its stability and resilience.
