ICHI Enters the Bond Market With Arbor Finance While Leveraging ICHI Vaults

DAOs are important in the world of cryptocurrency as they provide a new and innovative way to organize people and resources in a decentralized and community-driven manner, which can lead to greater efficiency and transparency. DAOs are revolutionizing the way entrepreneurs conduct business. Despite the bear market, the growth trend of DAOs is expected to continue, becoming the pivotal infrastructure to this quickly growing sector.

While DAOs have significant operational benefits such as organizational transparency, there are some challenges DAOs must still overcome such as financing difficulties. DAOs operate on a decentralized and trustless basis, which makes it challenging to secure traditional forms of financing, such as bank loans or venture capital. This can limit their ability to access the capital required to fund their operations and projects.

Thanks to the innovation in crypto, protocols such as Arbor Finance are now offering debt-based financing via simple and convertible bonds. This form of financing allows DAOs to secure the funds they need to continue developing and growing their organizations without sacrificing their governance tokens.

ICHI’s Simple Bond Is Live

Simple bonds allow DAOs and other on-chain entities to borrow stablecoins using tokens they have in their treasury as collateral. Bonds can be borrowed at fixed interest rates without the fear of liquidation while giving lenders a sustainable, fixed yield. Simple bonds are essentially zero coupon bonds, which are sold at a discount to the face value and do not pay coupons, hence why they are called “zero coupon” bonds.

ICHI has issued a simple bond using Arbor Finance protocols, borrowing 50,000 USDC at a fixed rate of 15%, which is 300% overcollateralized by the ICHI token. The plan is to deploy these funds into protocol-owned liquidity via ICHI’s Vaults. As a result, lenders are able to earn high yields at a fixed interest rate while ICHI will benefit from increased protocol revenue and the trading fees generated by the Vault.

Let’s dive deeper into Arbor’s Simple Bonds.

Arbor Finance Simple Bonds

Arbor enables DAOs to raise debt-based financing by issuing simple and convertible bonds that are fixed rate/term and non-liquidatable. For lenders, Arbor offers transparent, over collateralized, and high yield opportunities where they receive a fixed rate of return.

• Fixed-Rate borrowing — DAOs can lock in their borrowing cost, secure needed capital, and more accurately plan the future with.
• No credit risk — Arbor helps surface the DAOs financials and history with a collateral risk report or a public credit report. In ICHI’s case, there will be a collateral risk report checking the health of the ICHI token. In addition, DAOs heavily overcollateralize their bond issuances to mitigate incentive to default. DAOs also use an on-chain signature to promise they will repay the amount borrowed plus interest.
• Customizable bond parameters and choice of collateral.
• Auction based interest rate pricing — Lenders compete for the allocation into the bond ensuring the DAO gets the most market efficient rate.
• Low smart contract risk — Arbor smart contracts have been audited twice and are on Ethereum mainnet, eliminating any bridging risk investors are exposed to.

Furthermore, Arbor Finance has a gated listing process for DAOs to become borrowers on the platform. DAOs need to undergo a due diligence process involving internal and third party assessments to ensure the credibility of their treasuries and overall risk profile for lenders.

Closing Thoughts

The amount of creditworthy DAOs is growing rapidly and many of them have no debt and strong cash flows. Selling debt is an attractive way for DAOs to raise capital, with instruments provided by protocols such as Arbor Finance, DAOs are quickly unlocking their full potential.

While DAOs are still facing financing difficulties, many of these challenges can be overcome with innovation, collaboration, and the continued development of blockchain technology. Being able to borrow capital at fixed rates with no risk of liquidation is a great step towards building successful credit products for DAOs.

About ICHI

ICHI is a trustless market-making protocol that enables the use of sophisticated algorithmic strategies on Uniswap V3. Grow any token with low-slippage, on-chain liquidity using ICHI’s Vaults.

Learn more by visiting the ICHI website, Medium, Twitter, Telegram, or Discord.

About Arbor Finance

Arbor enables creditworthy DAOs to obtain fixed-rate financing using their project tokens as collateral. The over-collateralization of the bonds, along with the opportunity for DAOs to issue convertible bonds, makes Arbor an investor-friendly platform. By minimizing the risk of default and ensuring fixed yields, investors can identify and support decentralized financing opportunities.

If you are interested in learning more about Arbor as either a lender or borrower, check out their website and documentation or join their Discord.