Our ERC-3475 Standard is Adopted by the Ethereum Foundation to Take DeFi to the Next Level
Let the D/Bonding Begin!
We have created a new standard to introduce bonds and add value to improve Ethereum’s existing infrastructure and ecosystem. It is now accepted by the Ethereum Foundation, the network and ecosystem’s main supporter.
Our proposal had been evaluated and debated. Ultimately, it was deemed secure, complete, and ready to be presented not only to EF experts, but to all Web 3.0 and decentralised finance (DeFi) enthusiasts.
Thus EIP-3475 has now been accepted as a new Application Programming Interface (API) standard that makes it possible to issue bonds with multiple redemption data. (See why APIs are essential here.)
So it is now called ERC-3475.
What this means, in essence, is that ‘we are good to go’. It means the ERC-3475 that D/Bond offers, as a technology that enables anyone to create their own custom-made bonds, is now tested and approved. We continue pioneering a market for a new asset class on the blockchain: bonds.
ERC-3475 is what DeFi needs now
Decentralised bonds represent a revolutionary technology. As D/Bond is introducing its Abstract Storage Bonds standard, it is expanding and bringing additional value to the DeFi industry which has been growing and carrying virtually every element in the traditional finance (TradFi) system along with it.
Decentralised bonds are set to be the next asset class to be adopted after swaps and staking.
However, until now, these fixed-rate instruments have not been very efficient on the blockchain. Issuing these interest-bearing securities was an aspect of DeFi that no protocol was able to work out competently. It is mainly because existing token standards — codes that make tokens of a particular kind conform to an API template and function on-chain accordingly — cannot handle bonds.
The most basic token standard is ERC-20. Used by the vast majority of tokens today including fiat-backed stablecoins, ERC-20 tokens are limited with regard to issuing bonds. They represent a single entity. They require the deployment of token contracts per token type.
On the other hand, bonds have specific types and are divided into various classes. For example, some are on a fixed-rate basis (e.g. Olympus DAO), others as guarantees for loans by TradFi players like Société Générale, etc.
The incompatibility of the various classes of bonds, coupled with the limitation of available token standards, made issuing bonds difficult for DeFi projects.
The different classes make any DeFi protocol’s plans to issue bonds backed by their liquidity pool (LP) tokens — mainly ERC-20 tokens that do not have a complex data structure — almost impossible. On the system level, it causes fragmentation.
The ERC-20 format also does not allow for a reward and redemption logic to be stored on-chain. This usually leads to higher gas fees.
To be able to issue bonds, a DeFi project would require a token standard that has complexity in its data structure with multiple redemption functions.
A lack thereof has resulted in DeFi projects missing out on the fixed-rate functionality feature: they could not offer a fixed-income product that clearly defines bonds’ contractual terms like the rate of return, terms of repayment, interest rate, dates, etc.
Additionally, the early version of an Automated Market Maker (AMM) — which automates the process of providing liquidity — uses a separate smart contract and an ERC-20 LP token to manage a pair of tokens. This complicated process significantly reduces the overall liquidity in a pool. The result is unnecessary gas fees and slippage.
ERC-3475 upgrades ERC-20
This is not the case with ERC-3475. The Abstract Storage Bonds standard comes with new built-in functions that enable users to economise on their gas fees. Unlike ERC-20, ERC-3475 uses the multi-layer pool which allows for a bigger LP to create a vast multitude of pairs. As each bond stores all necessary data e.g. its supply and type, ERC-3475 removes the need to issue separate contracts every time a new LP pair is added to avoid common attack vectors like an impermanent loss. Thus our new standard helps simplify the management of an LP.
It is basically an upgrade of the ERC-20 LP token, transforming it into a multidimensional token that stores metadata on-chain.
With this, D/Bond is bringing a coveted asset class to the blockchain for everyone — even the underbanked across the globe. We will expose as many individuals and institutions to issue bonds and derivatives for a secondary market where the debt securities will be traded.
With no existing bond investment vehicles or exchange, we’ll make trading, investing, lending, and borrowing bonds possible without the hassles of an intermediary such as big banks.
This is it! Let the D/Bonding begin
If you have not been following our pursuit to build the future of DeFi, this is what we offer with our new ERC-3475 token standard in a nutshell:
D/Bond’s ERC-3475 is expanding Ethereum to solve the lack of tradable derivatives and bonds on the blockchain. The newly-accepted standard comes with characteristics that make storing additional metadata possible. This opens a whole new universe of financial possibilities — first by making decentralised bonds available across the globe.