A key feature of our decentralised bonds and derivatives-based liquidity provider (LP) proof system is its ability to offer a customisable agreement between an LP and a borrower for their loan/debt.
We have devised a way to issue bonds — a financial product that tends to be less volatile and less risky than others — in a decentralised form. It is the world’s first!
We are providing the tool to manage bond settings like interest rates made possible by our innovative ERC-3475 standard.
Our offering is aimed at meeting an essential demand of the decentralised finance (DeFi) market which is one of the most volatile.
DeFi today lacks trust and is highly risky. Risks from impermanent loss to scams discourage many people and institutions from entering this evolving space. Bringing sustainability and certainty to it is key. It is revolutionary.
The newly-accepted ERC-3475 token standard is setting the pace for our DeFi market-making platform to introduce bonds and derivatives creation and trading to as many individuals and institutions as possible.
So what are the elements in the ecosystem that we have built around this innovation?
Fund management: Within our ecosystem is D/capital, the decentralised-like fund's management firm that handles securities like bonds to meet specific investment goals for the benefit of investors. D/capital replicates everything about venture capital, an investment bank, and a nonprofit organisation.
Income generation: As an improved investment bank — that uses blockchain technology to ensure transparency, accessibility, and trustworthiness — D/capital can borrow money from investors to fund startups, buy stocks, speculate on the financial market, etc. It can also use the pledged assets of verified bond issuers to build up the liquidity pool for another DeFi project, invest in their seed phase, etc. In short, the feature was designed to make creditors look to it to efficiently use liquidity to generate income.
Decentralised Bond Governance Platform (DBGP)
Investment decisions are not made arbitrarily by D/capital, though. The fund management process is tied to our Decentralised Bond Governance Platform (DBGP) which uses an on-chain “proposal” as a voting procedure.
Decision-making power to the community: The proposal runs as an open-sourced smart contract that imposes an underlying obligation on the governance system to execute the content of a code like spending funds, issuing allocations, updating a smart contract, etc. DBGP enables our users/community members to participate in the governance process of all investment decision-making of D/capital. Our user engagement at every stage of the bond process is paramount.
Linked to these investment management tools is the D/Bond wallet. Designed to manage users’ accounts and their ERC-3475 assets in a variety of ways, the wallet is crucial in our user engagement all through the bond trading process.
All-purpose: D/Bond wallet is a hot wallet. It allows users to store, read, buy, redeem, exchange, and transfer any ERC-3475 standard-based asset. It supports ERC-3475 bonds or derivatives so they can be displayed, traded, and readable without any additional process.
Web 3.0-compatible: It is compatible with Web 3.0 infrastructures such as decentralised apps (dApps) or blockchain-based games. So the wallet can interact with related assets using the Ethereum Application Binary Interface (ABI) which communicates with the smart contract that is executed on the Ethereum Virtual Machine (EVM).
Open to DeFi projects: The ABI enables the D/Bond wallet to interact with the smart contract as an overall part of the Web 3.0 concept. It makes multiple DeFi projects prone to use the wallet as they issue derivatives, explore other market possibilities and build a derivative infrastructure for their potential markets. DeFi projects can also use the D/Bond wallet to interact with their smart contracts, without any adaptation or front-end development.
Staking: The D/Bond wallet is also a practical way to display all of a user’s stakings. Within the D/Bond ecosystem, an investor could stake in a stable company or a government bond. The market allows digital assets to be used as staking collateral to get bonds (assets later transferred back to the investor upon redemption). Staking also happens — as with DBGP when the user community considers investment proposals from D/capital — to get voting rights. All through, the D/Bond wallet is handy.
D/Bond decentralised exchange (DEX)
An open secondary market is the easiest way to exchange decentralised bonds. The D/Bond DEX is the secondary market for the ecosystem since a common automated market maker (AMM) method is not adaptable to ERC-3475-based bonds.
APM, not AMM: With AMMs, liquidity pools (LPs) and providers function together. They use separate smart contracts and ERC-20 LP tokens to manage pairs thus significantly depleting the overall liquidity in one pool and thus generating unnecessary gas spent and slippage.
Whereas D/Bond uses the APM which is based on a multi-layer pool as an AMM optimization for its ERC-3475-based bonds. APM allows liquidity to be added to the pool and tokens to cut unnecessary gas fees when new tokens are added while consolidating liquidity. A big liquidity pool could also be built with all the pairs inside it and ERC-20 pool tokens converted to ERC-3475’s multiple callable bond tokens.
Dutch auction method: The majority of these bonds have to be bound together before they are put into an open order on the secondary market using a specially-designed auction system. For this purpose, the D/Bond DEX uses the Dutch auction method — buyers have to compete with others to find the real market price of a derivative .
The Dutch auction method achieves the goal of making the market negotiate the right price for the bonds by enabling the D/Bond DEX to implement the Nash equilibrium, a theorem that helps solve non-cooperation between two or more parties.
Ease of use: The ERC-3475 standard interface allows any tokens on a Solidity-compatible blockchain to create their bond which can then be exchanged on the secondary market. Selling on the DEX is easy.
A prospective debtor can purchase a bond to obtain the collateralised assets of the creditor who received the loan. The creditor could reclaim the pledged assets should the loan be repaid before the repayment date. If not, the bond would have to be redeemed after the marked repayment date as agreed with the bondholder. In the meantime, the debtor can split or pack the bond into packages and sell them on the D/Bond DEX.
The D/Bond DEX uses D/Bond Index Token (DBIT) as the only settlement currency.