EIP-3475 passed to support the issuance of multiple callable bonds and financial derivatives
Recently, the proposal "EIP-3475: Abstract Storage Bonds" submitted by the decentralized bond ecological platform D/Bond was approved by the Ethereum Foundation. As an application standard proposal, EIP-3475 provides a new API standard - ERC-3475.
EIP-3475 supports the creation of tokenized certificates with abstract on-chain metadata storage, enabling each bond class ID to represent a new configurable token type and corresponding to each class, enabling issuance of bonds with multiple redemption data become possible.
Under the ERC-3475 standard, any user can customize and issue decentralized bonds and financial derivatives with complex structures, such as futures, options, warrants, swaps, etc., just like in the TradFi market. Moreover, D/Bond provides a complete financial ecology including the secondary trading market for these bonds and derivatives.
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Make up for the shortcomings of DeFi bonds
DeFi is considered to be a decentralized "parallel world" of traditional finance. TradFi market savings, lending, asset management, exchanges, derivatives, insurance, funds and other formats can all find corresponding mirror scenarios in DeFi.
However, as one of the basic financial instruments of TradFi, there is no corresponding truly decentralized bond product on the blockchain. Although there are also some fixed-income products, they have not aroused great repercussions.
This is because bonds are often classified into different categories according to their specific type. According to the method of interest calculation, there are fixed-rate bonds and floating-rate bonds; according to credit risk, there are secured bonds, surety bonds, unsecured bonds, etc.; Long-Term Bonds Over 10 Years; By Repayment Terms…
Previously, the industry lacked a technical standard and DeFi protocol to support the issuance of complex interest-bearing bonds. Take the current most common token standard ERC-20 standard as an example. It needs to deploy smart contracts for each bond type separately. Different types of bonds are not compatible, which obviously cannot meet the needs of bond issuance with complex data structures. need.
Moreover, due to the different types of bonds, it is almost impossible to issue bond products based on the existing DeFi protocol with the liquidity pool provided by the ERC-20 token, because the ERC-20 token does not have a complex data structure.
Also, ERC-20 does not support storing bond return and redemption logic on-chain, as this would result in high gas costs.
Obviously, if DeFi wants to get involved in the bond field, it urgently needs a new standard that supports complex data structures and multiple redemption functions. Previously, due to the absence of this standard, DeFi has always been powerless in the field of fixed-rate products—it is impossible to develop smart contracts with clear terms such as rate of return, repayment conditions, interest rates, and maturity dates.
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A major upgrade to ERC-20
ERC-3475 is a brand new smart contract interface standard for issuing and managing multiple callable bonds.
Under the ERC-3475 standard, a single contract contains any given number of bond types, bond random numbers, and bond amounts on a certain address. This standard provides independent functions to read and transfer any bond set, and allows Redemption of bonds from the bond issuer upon certain conditions.
The complex data structure endows the ERC-3475 token with enough flexibility to support a variety of redeemable bonds, and each bond is assigned an independent algorithm without additional deployment of smart contracts. That is to say, one contract can manage multiple bonds of different types, different interest rates, and different redemption conditions, which is not only convenient and efficient, but also more economical, which can save users gas costs.
Based on the ERC-3475 standard, not only standard bonds in the traditional sense can be created, but also more complex financial derivatives such as forwards, futures, options, binary options, warrants, swaps, etc., including off-chain derivatives. Users can package existing bonds into derivatives covering different risk-reward combinations and trade them on D/Bond DEX.
In addition, automatic market makers (AMMs) need to use separate smart contracts and ERC-20 LP tokens to manage trading pairs, which also greatly reduces the overall liquidity of LPs and consumes unnecessary gas fees. Network congestion causes transaction delays.
Unlike the automatic market maker (AMM) under the ERC-20 standard, which needs to use separate smart contracts and LP tokens to manage trading pairs, ERC-3475 uses a multi-layer liquidity pool to support larger LPs to create many trading pairs. Since each bond stores all its necessary data (such as bond supply and type), ERC-3475 does not need to issue a separate contract every time a new LP pair is added, which not only greatly improves the liquidity of LPs, but also saves It saves the gas fee and avoids the risk of being attacked. Therefore, ERC-3475 will greatly simplify the management of LPs.
In simple terms, ERC-3475 is an upgrade to ERC-20 LP token, converting it into a multi-dimensional token that stores metadata on the blockchain.
With this, D/Bond will bring a promising blockchain asset class to global users, allowing more individuals and institutions to issue different types of bonds and financial derivatives, and provide a secondary trading market. Here, bond issuance, investment, trading, redemption, etc. no longer need to rely on intermediaries such as traditional banks, which not only eliminates user access thresholds, but also saves various troubles and expensive costs brought by intermediaries.
By solving the pain point of lack of tradable bonds and financial derivatives on the blockchain, ERC-3475 will greatly expand the Ethereum ecosystem. Based on ERC-3475, D/Bond will open up a new decentralized financial track.
