88mph Zero-coupon Bonds
After months of hard work, we are excited to finally release the zero-coupon bonds feature for 88mph. Zero-coupon bonds will provide liquidity to depositors, derisk the floating-rate bonds, and enable the first structured products in DeFi. Structured products will allow DeFi users to speculate on crypto prices at no cost, and even earn yield at the same time.
Get started: https://88mph.app/zero-coupon-bonds
How it works
Zero-coupon bonds are bonds that can be redeemed for their face value when they become mature on a certain date (Investopedia). For example, if you had a zero-coupon bond with a $1,000 face value that matures in 30 days, it means after the 30 days you will be able to trade in the bond for $1,000.
In the context of 88mph, zero-coupon bonds are ERC20 tokens that wrap around multiple fixed-rate deposits. They are 1-for-1 redeemable for the underlying token (e.g. UNI) upon maturation. Any user can mint a certain zero-coupon bond using a fixed-rate deposit, as long as the maturation date of the deposit is earlier than that of the zero-coupon bond. When the bond is mature, bond holders can trade in bonds for their face value.
Liquidity for deposits
Without zero-coupon bonds, 88mph deposits are only tradable in the form of NFTs, which are much less liquid than ERC20 tokens. With the introduction of zero-coupon bonds, depositors can easily trade their deposits on exchanges such as SushiSwap and Uniswap.
Furthermore, users who want to earn a fixed yield can buy zero-coupon bonds rather than deposit directly into 88mph. This can save gas, especially if the bonds are bridged to L2 platforms like Optimism and DeversiFi.
Derisking floating-rate bonds
Community members have pointed out before that because interest payouts to floating-rate bond holders only happen when the underlying deposits are withdrawn, FRBs carry the additional risk that none or few of the depositors actually withdraw their funds, which would decrease the interest payout.
While we have added a function for FRB holders to manually trigger interest payout in the newer 88mph pools, the risk remains for the older pools. Zero-coupon bonds can mitigate this risk, because once a deposit is used to mint ZCBs, anyone will be able to withdraw it once it becomes mature.
Initial lineup
At launch, there will be zero-coupon bonds for the Compound UNI pool and the Harvest 3CRV pool. Each pool will have two series of bonds, one that matures on August 1st, 2021, and one that matures on February 1st, 2022.
We kept the launch lineup small, to make sure that each pool gets the attention and liquidity it deserves. In the following weeks, we will let the community decide which pools to deploy ZCBs for and what maturations to choose.
Speculate on crypto, for free, and earn yield— the magic of structured products
Zero-coupon bonds enables us to build principal-protection structured products that are simply black magic.
Suppose you have $1,000, and you are bullish on ETH. You decide to use $900 to buy 1,000 3CRV zero-coupon bonds and use $100 to buy an ETH call option, both of which mature after 30 days. After waiting, your ZCBs have matured into 1,000 3CRV, which is worth more than $1,000 since 3CRV has been earning trading fees from Curve this whole time. The price of ETH has risen, so you exercise your call option to get some nice clean profits. However, even if ETH has dropped in price, making the call option worthless, you wouldn’t have lost anything, since the cost of the option was covered by the fixed-rate interest from the ZCBs.
This is kind of amazing. With zero-coupon bonds, you can speculate on the price of assets in either direction, without any cost to you, and earn yield on the principal at the same time.
Moreover, if you bought ZCBs of speculative assets such as UNI, you would be able to ride along the price action of UNI while also expressing your opinion on another asset like ETH or BTC, at no extra cost to you. That’s some capital efficiency!
Needless to say we are extremely excited to see structured products like this being built on 88mph. In fact, we intend to work on it ourselves. If you have ideas of what structured products you would like to see, definitely let us know! If you are working on a structured product platform yourself, we would also love to collaborate on this (and let you do all the hard work for us 😂, jk, but we’d love to support your hard work via our grants program).
NFT collab
We are extremely pleased to start a collaboration with Warakami. His aesthetic forced us to reach out to him and commission the awesome creation “Internet Bank 1985 — OS Update”. The NFT is available in 88 editions here: https://app.rarible.com/token/0xd07dc4262bcdbf85190c01c996b4c06a461d2430:159366:0x4ddc4a3b6813436e5d2ca27a9ac0be92bf3df0d4. All the proceeds are distributed to the artist.
It’s the first NFT of a long series where the gap between DeFi and NFT Metaverse vanish to create something really exciting. Stay tuned.
Learn more
- Website: https://88mph.app/
- Docs: https://88mph.app/docs/
- Radio: https://88mph.app/fm/
- Twitter: https://twitter.com/88mphapp
- Telegram: https://t.me/join_88mphapp
- Discord: https://discord.gg/jNBGTjTZ7y
- Youtube: https://www.youtube.com/channel/UCEr3cuwaggjkw8TajaPSpgg
