Skip to main content

Bond Tokens

Bond Tokens are ERC-20 tokens backed 1:1 by corporate bonds purchased in traditional markets. They combine the stability and returns of traditional bonds with blockchain composability and accessibility.


Corporate bonds typically require minimum investments over $100,000, excluding most retail investors. Bond Tokens solve this through fractionalization: each token represents a $100 face value with 18 decimal places for precise trading, making corporate bond exposure accessible to everyone.

Token Architecture​

Bond Tokens achieve a balance between regulatory compliance and DeFi composability:


Full Fungibility:

• ERC-20 compatibility enables DEX trading
• Compatible with DeFi protocols (lending, borrowing, yield farming)
• Collateral for money markets
• Snapshot-based coupon (interest) payments ensure fungibility


Technical Features:

• Transfer Resistance: Historical coupon entitlements immune to gaming
• Verifiable Distributions: All claims cryptographically verifiable via Merkle proofs
• 18 Decimal Precision: Enables precise fractional ownership


Naming Convention​

Each Bond Token corresponds to a specific bond issue, following the naming convention btXXX, where XXX represents the first word of the issuer's name. This ensures clear identification across the platform and DeFi ecosystem:


Examples:
• A bond from Alpha Corporation → btALPHA
• A bond from Beta Enterprises → btBETA
• A bond from Gamma Holdings → btGAMMA


DeFi Composability​

As standard ERC-20 tokens, Bond Tokens integrate seamlessly with the DeFi ecosystem:


• Trade permissionlessly on DEXs and AMMs
• Use as collateral in lending protocols
• Provide liquidity to earn trading fees
• Combine with other DeFi primitives


For complete details on secondary market trading, see Secondary Market.

Tokenomics and Distribution​

Supply Mechanics​

Bond Token supply is determined using the bond’s dirty purchase price, accounting for the accrued interest paid at the time of purchase:


Total Supply = (Target Funding Amount × 10¹⁸) ÷ Dirty Price

This calculation ensures economic equivalence between traditional bond ownership and tokenized representation, while enabling precise fractional trading down to 18 decimal places for DeFi compatibility.


Token operations use the Math.mulDiv function to maintain precision across 18 decimal places, following OpenZeppelin standards.


For a worked distribution example with decimals and exchange rate math, see the FpUSD Real‑World Example.

Bond Token Lifecycle​

Bond Tokens progress through a complete lifecycle from creation to redemption. Understanding these operational stages helps investors plan their participation and maximize returns:


Lifecycle Stages:

• Issuance: Primary market funding where Bond Tokens are created through KYC-verified investment
• Trading: Permissionless secondary market trading on DEXs and AMMs
• Coupon Distribution: Automated periodic interest payments to token holders via snapshot-based entitlements
• Redemption: Final principal repayment at maturity or early redemption


For complete operational details, explore each lifecycle stage using the navigation menu or the links above.

Compliance Model​

Bond Tokens balance regulatory compliance with DeFi innovation through a hybrid approach:



Trading is permissionless — buy, sell, and transfer Bond Tokens on DEXs without KYC. However, receiving bond proceeds requires identity verification: primary issuance, coupon payments, and principal redemption all require KYC compliance.



This model maintains traditional bond market regulatory standards while enabling permissionless DeFi participation. For security details, see the Security Audit Report.

Features​

Bond Tokens include advanced features that bridge traditional and onchain bond markets:



Issuer Call Rights: When bond issuers exercise early redemption rights at predetermined call dates and prices, the Bond Token supply is force-transferred and holders are compensated with the issuer's payment.



Document Management (ERC-1643): All bond documentation — prospectuses, covenant updates, disclosures — is permanently recorded onchain with content hashes and timestamps, ensuring transparent access to the complete bond lifecycle history.