Looming Recession, Bearish Market Highlight Importance of Bonds
D/Bond presents the first-ever token standard for decentralized bonds to make financial value preservation possible for anyone anywhere with the power of blockchain
The world economy is on the verge of tipping into a recession. The ominous indication follows recent global market turmoil — owing to various macroeconomic and geopolitical factors — which triggered inflation, a rise in interest rates, and slow growth projections.
As a measure to tackle inflation, the Bank of England and the Swiss National Bank have both acted like the US Federal Reserve which recently raised interest rates by its largest margin in almost 30 years. Shares in the US have been at their worst start to a year in 60 years with the S&P 500 index dropping by 23% since January and JP Morgan forecasts an 85% chance of a recession in the US which, as the largest economy in the world, will have a ripple effect. There is fragmentation in some European markets, and China is battling foreign outflows.
The crypto space is not left out of the downward trend. It has been in a prolonged bear market since December 2021 and has seen Bitcoin, the world’s largest cryptocurrency by market cap, plunged by about 70% since November 2021 and worsened by the sudden collapse of the Terra USD stablecoin.
The downtrend coincides with the global economy recovering from the impact of the COVID-19 pandemic which has segued into another crisis with a similar far-reaching effect: the Russia-Ukraine war. Palliative measures have so far led to a continuous global monetary tightening cycle that is strengthening the likelihood of an economic recession but, in turn, highlights the importance of bonds at a time like this.
Then comes the bond
Generally, bonds tend to be worth more during a recession as they hedge better in market downturns. Bonds come in handy when an investor needs capital to re-invest in a down market or for spending purposes instead of cutting losses on volatile assets and help to de-risk.
Yet, while there is high demand for bonds that stand out as a way of preserving capital as well as a reliable investment that also helps bring diversification to an investor’s portfolio, the barriers to entry to this asset class are extremely high. Only large corporations and governments issue them — while investors have to pay high fees for their investments when they go through intermediaries.
In alignment with the unfolding situation, decentralized finance (DeFi) start-up, D/Bond, is introducing ERC-3475 as the first-ever token standard to bring decentralized bonds (debonds) to more users. ERC-3475 is a new liquidity provider (LP) token standard that can manage multiple bonds, store more data, be gas-efficient, and allows any tokens on Solidity-compatible blockchains to create their own bond.
The multiple-callable standard has in-built functions that make ERC-3475 bonds divisible and exchangeable in the secondary market — where users can buy and sell debt securities — while their trading and burning multiply tokens’ market cap and help to recover from a recession period.
TradFi to DeFi game-changer
D/Bond brings the coveted asset class to almost everyone — even the underbanked across the globe — through the blockchain. Decentralized without a central point of control, not alterable, and with no intermediaries, D/Bond’s innovation seeks to improve DeFi’s efficiency with a more stable infrastructure that prevents impermanent loss which happens when the price of an LP’s token changes after being deposited in the liquidity pool. All of these are built on the blockchain infrastructure which promises a greater amount of transparency than what is currently available in the traditional finance (TradFi) setting.
“The ERC-3475 is a unique and a significant improvement to what the traditional finance (TradFi) system offers right now,” says the D/Bond CEO, Yunan Liu. “It helps us bring together much of DeFi’s potential to the TradFi market as our platform offers fixed-rate interests and guaranteed repayment as money managers say the threat of recession is real and indications are rife that the trajectory of spreads is changing.”
Now valued at $35 million, and so far garnered support from investors such as Bixin Ventures, Exnetwork, Wave Capital, Crypto Dorm Fund, F12 Capital, Collinstar Capital, and the investment arm of hoo.com, the increasing need for the debond use case alongside its growing market opportunities in the DeFi space makes D/Bond a game-changer
Airdrop and NFT activities
D/Bond has started to incentivize its community with an airdrop campaign to, among other things, mark the actual start of its debond process and introduce its protocol’s native asset DBIT into circulation. The campaign which started on Monday, June 13, will run until August 8, 2022, to reward long-time and new D/Bond community members for completing some tasks.
It is also offering discounts on minting unique D/NFTs that each showcase original and carefully crafted artworks that are inspired by D/Bond’s identity and groundbreaking mission, the classic sci-fi movie, “2001: A Space Odyssey”, and the contemporary “land art” movement.