TZ-bills — from the USD Tez Reserve

Introducing TZ-bills, a Tezos smart-contract alternative to T-bills

Kevin Mehrabi
Oct 30, 2019 · 5 min read

A TZ-bill is a bond token; a digital asset issued through a Tezos smart-contract through a Tezos security token standard, returning an appreciated investment as a lump-sum payment to the purchaser upon the designated day and time defining ‘maturity’.

Of course, the concept is derived from Treasury Bills (more commonly referred to as T-bills). T-bills are a debt instrument issued by the United States Treasury—and for a similar purpose as TZ-bills. The USD Tez Reserve will sell TZ-bills through Tezos.bond to help fill its 4:1 over-collateralization target for its reserve silos — or more specifically, to assist the activities which will fill the silos. TZ-bills (as a smart-contract) will reward its purchasers for their astute foresight in the opportunity.

Here’s a bit more context to show how TZ-bills will help USD Tez fill the reserve to capacity—and to grow from 1:1 collateralization up to 4:1 collateralization—very quickly.

Securities Categories:

  • Debt Securities (e.g Bonds, Debentures, Term-Loans)
  • Derivative Securities (e.g. Futures, Options, Swaps)

Bonds a major vehicle of the “Debt Security” family. T-Bills are a type of Bond. There are several types of bonds, though it should be noted in Tezos staking, baking bond deposits have a very specific association (nonetheless rooted in the general concept of a bond).

Types of Bonds:

  • Municipal Bonds
  • Corporate Bonds
  • Convertible Notes

Treasury Bonds are issued by governments, whenever they need to generate more funding. Money raised from Treasury Bonds serves to collateralize the FIAT money that governments print, by giving them a lendable reserve that can generate interest. That interest enables these respective treasuries to pay back their bond purchasers upon the date of maturity and profiting to expand their own activities in the future, ideally less dependent on bonds. Effectively, they are borrowing money from the citizen purchaser of the bond and paying that citizen back with interest over time.

The U.S. Treasury issues T-bills (the most common and well-known type of Treasury Bond in the world) as well as other debt instruments, including:

Treasury Bond Types

  • Treasury notes
  • Treasury bonds
  • Treasury Inflation-Protected Securities (TIPS)
  • Floating Rate Notes (FRNs)
Facsimile example of a T-bill sold by the US Treasury

TZ-bills, purchasable with USD Tez (USDtz), will pay return rates that will likely end up far better than the return rates of T-bills, making it a more attractive investment opportunity without the significant downside of risk. TZ-bills are not just simply offered with the “full faith and credit of USD Tez Foundation” (as T-bills are offered with the “full faith and credit of the United States government”), but with something much stronger — a smart-contract executed through the Tezos blockchain.

To see the current return rates of newly issued and historically issued T-bills, visit this link from the United States Treasury auction.

TZ-Bill Auctions

The bond’s price is measured in its discount from $1.00 so expressively a descending auction would be the most appropriate alternative to the U.S. Treasury’s auction structure of T-bill auctions.

That is, the auction of a TZ-bill will start with a minimal amount of return by the date of the TZ-bill’s maturity. For example, the auction will begin at offering a sale price of $0.99 for each dollar that will ultimately be returned to the purchaser by maturity date. If there are no takers, then the price would lower to $0.98 cents, and if there are no takers still, then the price would lower to $.97, so on and so forth.

Eventually, an individual participant will stop ‘holding out’ and make the purchase since FOMO will kick-in, as the auction’s competition-factor increases in an inverse relationship to the TZ-bill’s offer price, and each participant knows this.

Risk Premium

People’s confidence in a digital asset will vary. The way this plays out in the market for TZ-bill auctions is, first, there is an added risk premium to TZ-bills relative to T-bills. Therefore, we can foresee the descending auction being less competitive, and therefore landing on a better price for discount and yield.

For example, a 6-month T-bill for $100 dollars at maturity was recently auctioned for $99.18. For most people, that sounds like its not worth it, but if ‘safe’ is what you’re looking for, a T-bill is a solid investment. After all, it’s backed by the U.S. Treasury.

Naturally, a 6-month TZ-bill would inspire less confidence (at first) because USD Tez Reserve is very much not the United States Treasury. Although this should not be a shock to the reader, and while this may sound self-deprecating, I bring it up because (as the keen observer may have already realized), it’s actually an advantage to the purchaser.

How to make money from TZ-bills

Therefore, the people who have the most to gain will be the earliest adopters — that is, the earliest participants in TZ-bill auctions, because the TZ-bills they end up purchasing will be the TZ-bills that have the highest returns maturing in the shortest amount of time.


If you haven’t already, be sure to check out the preceding article:

USD Tez — Collateral² (squared) Model


Coming soon: USD Tez Whitepaper

USD Tez (USDtz) Official Website — USDtz.com

Also, be sure to join our social media channels:

Telegram — USD Tez

Twitter — USD Tez

USD Tez (USDtz)

USDtz is a Tezos-based stablecoin pegged to the US dollar

Kevin Mehrabi

Written by

I have some thoughts. Founder/CEO, doing creative product things with #Tezos and #DeFi — oh and I like TV…a lot #Bahai #TzFi

USD Tez (USDtz)

USDtz is a Tezos-based stablecoin pegged to the US dollar

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