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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 $200,000, 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 from the net capital raised (after platform fees are deducted at extraction) and the bond's dirty purchase price:


Total Supply = Net Capital Raised ÷ Dirty Price

Where Net Capital Raised = Total Capital Raised − Platform Fees and Dirty Price = Clean Price + Accrued Interest. The dirty price reflects the accrued interest paid at the time of purchase, ensuring economic equivalence between traditional bond ownership and the tokenized representation.


Supply is tracked with 18-decimal precision. All token math uses OpenZeppelin's Math.mulDiv. In v3 a single Bond Token (one bond series, one maturity date) can be issued across multiple funding rounds — each round emits additional supply at its own dirty price, and the contract tracks the mint price per round.


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 their right to buy back a portion of the issue before maturity, the callable Bond Token supply is redeemed pro-rata across all holders and each holder receives the corresponding USD stablecoin payment. Settlement is coordinated onchain through a snapshot-based relayer flow — Bond Tokens are burned and the stablecoin payment is delivered in the same transaction, with no Merkle tree required. See Redemption for the full issuer bond call flow.



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.



Reduced Admin Privilege Surface: Pause acts as a true global stop for all Bond Token movements. There is no admin force-transfer capability. Token supply can only be reduced through two privileged paths: a compliance burn from blacklisted addresses, and Distribution-controlled burns during bond calls or principal redemption — where burning and payout to the holder occur in the same transaction.



Compliance Burn: The Admin Gnosis Safe holds a dedicated COMPLIANCE_BURNER_ROLE that can burn tokens only from blacklisted addresses, even while the contract is paused. Attempts against non-blacklisted addresses revert. Every compliance burn is logged onchain.



Distribution Burn Authority: The Distribution contract holds PRINCIPAL_REDEMPTION_BURNER_ROLE, which lets it burn Bond Tokens on behalf of holders during relayer-driven principal redemptions and issuer bond calls — without requiring per-holder allowances.