An investment bond represents a loan from an investor to a borrower (usually a corporation or government). Bonds can be conceptualised as an agreement between a lender and a borrower that details the loan and its terms. A bond is a security that a company, municipality, the state can issue or government entity to fund projects or operations. The debt holders of bonds are known as creditors of the issuer.
Cryptobonds: Bonds x Blockchain
Blockchain Bonds are automated bond contracts that utilise the capabilities of blockchain databases, operating as cryptographically-secure yet transparent and open systems. The ability of blockchain bonds to create a decentralised database of unique digital assets has the potential to revolutionise the financial markets.
Bond issuers could automate the entire bond issuance process through blockchain bonds, potentially resulting in shortened settlement and transaction times in addition to increased transparency for the issuer. Due to increased transparency and automation, issuers would no longer need intermediaries, which would result in increased savings.
With its goal of becoming “the decentralised crypto platform of choice,” Position Exchange is a project bringing together different features of Decentralised Financial Infrastructure as part of a more significant project. Bonds are a great financial instrument since we focus on derivatives products with a stable income stream and significant market demand.
When analysing the current DeFi projects and products, we see a number of automated pools that facilitate the interaction between lenders and borrowers. It guarantees that liquidity is always available and that funds can be borrowed. However, it has a meagre return on investment.
Investing in bonds follows a similar format but offers a better/stable return and is more suited for a larger market. Users can be individuals, companies, or organisations. Bonds also have a broader range of purposes and use-cases; they can be exchanged, used for governance, financing, and more. Bonds are a beneficial financial instrument, and integrating them in the Blockchain can be transformative.
As part of its new Derivative Products, Position Exchange has introduced fully on-chain and stackable bonds. Bond Pool users can purchase bonds and stake them in them for a defined period at a stable and fixed interest rate. Once the bonds mature, the issuer pays back plus interest.
In addition to being backed by assets as collateral, the bonds will be secured by smart contracts. Position Exchange will guarantee payments to investors upon maturity.
Individuals, companies, and projects also have the option of exchanging bonds on the Position Bond Exchange and issuing their own. Tokens, coins, NFTs, or even real estate can be used as collateral to borrow money from investors by issuing Position Bonds. By creating Position Exchange, DeFi users will have access to financial solutions, and bonds will be added to the Blockchain.