Bonds Role In DeFi Is About To Change

A number of global economies are on the brink of recession and the outlook for the next year appears to be downright gloomy, considering the uncertainty in the market. As inflation continues to surge, Nomura, the investment bank, recently said that the euro zone, the United States, Japan, and the United Kingdom are some of the economies that are at risk of a recession.

No bonds in DeFi

The stock markets have been battered and the crypto markets have been dealing with a massive amount of turmoil. During such times of turmoil and uncertainty, it is a fact that bonds appear more attractive. These are essentially classified as debt instruments i.e. IOUs. Companies and governments issue these bonds and the public holds them.

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The holders continue to receive interest and once the bond matures, the nominal value of the bond is also paid out. Even though they have existed for decades, it is a fact that bonds have not been introduced in the world of decentralized finance (DeFi). This is due to the fact that ERC-20 tokens are the basis of most projects in the DeFi ecosystem, which do not have any specific contractual terms, such as maturity dates and coupon rates. Yet, these attributes are vital to bonds.

A new token standard

According to D/Bond, they have come up with ERC-3475, which is a new type of token standard and has been designed for overcoming the technological hurdles that stand in the way. The use of this standard would allow securities to be issued on the blockchain and traded.

It believes that this provides anyone the opportunity to create their own bonds in the future and a bespoke decentralized exchange will be available for trading them. Users will be able to use their D/Bond wallet for storing their ERC-3475 tokens.

A decentralized bond ecosystem,

Yunan Liu, the chief executive of D/Bond, said that the new token standard is unique and is a major improvement over what you can find in the traditional finance (TradeFi) world. He went on to say that with the ERC-3475, they would be able to bring the potential of decentralized finance to the TradeFi world because their platform offers guaranteed repayments and fixed-rate interest.

This comes at a time when money managers are claiming that recession risks are real and indications are clear that spreads are changing their trajectory. PeckShield is conducting a security audit of the new token standard. D/Bond has also said that it has partnered with Blockpit to help its customers in managing their finances on their own.

According to D/Bond, modernization is essential for traditional bonds and access to these instruments is difficult for everyday customers because they do not meet the participation criteria. Therefore, they are designing the project to be open to everyone. The company said that the new token standard can collateralize both fungible as well as non-fungible tokens (NFTs).

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This will boost interoperability between decentralized bond markets, once interest starts to grow.