> For the complete documentation index, see [llms.txt](https://bonsai-dao.gitbook.io/bonsai-dao/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://bonsai-dao.gitbook.io/bonsai-dao/more/usdseed-redemption-and-vesting.md).

# $SEED Redemption & Vesting

#### Overview

$SEED holders can redeem $Bonsai at a **10% discount** by pairing tokens and completing a vesting cycle.\
This mechanism powers Bonsai’s **buyback flywheel** — a continuous loop that recycles ETH into Bonsai value.

#### How Vesting Works

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Vesting is the process that converts your $SEED into the *right* to buy discounted $Bonsai.

1. **Pair your tokens:**\
   → 1 $SEED + 1 $Bonsai
2. **Start vesting:**\
   → Begin a **1-week vesting period**.
3. **Redeem:**\
   → After vesting, you can **buy the same amount of $Bonsai** using ETH, at a **10% discount**. You must complete the purchase **within 4 weeks after vesting** or the redemption expires.
4. ETH is used for $Bonsai Buybacks.

Redemptions are **first-come, first-served** and limited by the current Redemption Pool supply.

#### The Redemption Pool

A capped on-chain pool of $Bonsai tokens available for redemption.

**Example:**

* 5,000,000 $SEED can be redeemed against 5,000,000 $Bonsai
* The 10% discount = 500,000 $Bonsai in value (≈ $1M if $Bonsai = $0.20)

Once the pool is exhausted, no further redemptions occur until the DAO refills the pool through governance.

#### The ETH Flywheel

Every redemption generates ETH inflow back to the DAO.\
Instead of sitting idle, this ETH fuels **ongoing $Bonsai buybacks** — strengthening price and value for all participants.

**Flow Summary:**

1. User redeems $SEED → buys $Bonsai with ETH
2. ETH returns to DAO treasury
3. The treasury uses ETH to buy back $Bonsai from open market
4. Buybacks tighten supply and reinforce staking yields

<figure><img src="/files/ejReiaAg5KdiBmYQgHaT" alt=""><figcaption></figcaption></figure>

A self-sustaining loop that compounds with every redemption.

#### Dynamic Supply Control

* The Redemption Pool is **on-chain and capped**, ensuring redemptions stay sustainable.
* Pool replenishment and emission pacing are controlled by the Bonsai team.
* This model protects both the **price floor** and the **long-term redemption value** of $SEED.

#### A Quiet Ecosystem Loop

This system aligns all Bonsai participants:

* **Vault users** earn SEED for deposits
* **Redeemers** inject ETH into the DAO
* **Buybacks** reduce $Bonsai supply, and increase value of $Bonsai
* **Stakers** earn from additional emissions