Position Bonds: Crypto Bonds Powered by Smart contracts
What is a Bond?
A bond is a fixed-income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.
Learn more: What Is a Bond?
Position Bonds will work similarly to traditional bonds, but run fully on blockchain and will stackable. How is that? Check this out below.
The Story behind Position Bonds
Position Exchange is a Decentralized Crypto platform aiming to bring different DeFi features under one big projects with its goal to become a hub for Decentralized Crypto Trading and Exchange. As we are focusing on Derivatives Products, Bonds are a great financial instrument that has a stable and predictable income stream and big market demand.
Looking at the current DeFi products and projects, there is an abundance of Lending Protocols providing Automatic Pools where lenders and borrowers interact. This design is efficient to ensure there is always liquidity available and funds to borrow. However, the return on investment remains very low.
Bonds follow a similar format but provide higher/stable return and is targeted for a bigger market. Users can go from individuals to organization or companies. Bonds also have broader use-cases and purposes, it can be exchanged, used for governance, financing and much more. It is a highly useful financial instrument and integrating it in the Blockchain is game breaking!
Position Exchange is introducing its first Derivative Product, the fully on-chain and stakeable bonds. Users can purchase bonds and stake it in the Bond Pool with a stable and fix APR for a determined duration and once the bonds reach maturity, the issuer will pay back the investment plus interest. The bonds will be backed by assets as collateral and will be locked in smart contracts. Payment to investor when bonds reach maturity will be ensured and guaranteed by Position Exchange.
They can also exchange bonds in the “Position Bond Exchange” and even issue their own. Individuals, companies, projects can lock their assets (tokens, coins, NFT or even real estate) as collateral and issue Position Bonds to borrow the money from the investors.
Position Exchange is creating a complete feature, providing financial solutions to DeFi users and introducing bonds to blockchain.
How do Position Bonds work and what does “stakeable” mean?
Position Bonds can be stake in the bond Pool with a stable and fixed APR.
Example: (please note that this is just an example)
Position Exchange (issuer) decides to issue bonds:
- Issue price: $1.0
- Underlying asset: 500,000 POSI
- Face value (par value): $1.2 (Price returns at maturity)
- Supply: 1,000,000 units
- Duration: 3 years
- Stake APR: 250%
Imagine A — an investor interested in purchasing the bonds with $1,000,000 as investment, the issuer will receive $1,000,000, A receives 1,000,000 bond units. Then A decided to stake all the bond into to the staking pool to earn with a fixed 250% APR.
After 3 years, the issuer must pay back the investor $1,200,000 (face value $1.2) then the issuer can claim the underlying asset, investors can claim the face value from the smart contract.
In case of payment default of the face value, the underlying will be distributed among investors.
Leveraged by the staking pool, investors now could earn up to 770% YTM (yield to maturity).
Position Bonds Development
User will be able to experience the fully on-chain Crypto Bonds. Issue, Purchase and Earn high yield with Position Bonds.
The Bond feature will developed on 3 main phases:
Phase 1: Position Bonds implementation powered by smart contracts. Purchase and Stake Position Bonds with High & stable returns.
Phase 2: Bond Exchange. Buy and Sell Bonds easily and fully on-chain on the Bond exchange.
Phase 3: The Bonds Launchpad. Whether you are an individual, project or companies seeking financing and investment, you can issue your own bonds easily on Position Exchange by applying and providing a collateral.