Bond Tokens: Democratizing Access to Corporate Bonds
Bond Tokens (BTs) are crypto-native ERC-20 tokens backed by bonds purchased in traditional markets. These tokens combine the stability of traditional corporate bonds with blockchain accessibility, designed to give retail investors, small-to-mid portfolio managers, and crypto treasuries access to emerging market corporate bonds.
How Bond Tokens Work
Traditional emerging market corporate bonds typically require minimum investments over $100,000, which excludes most retail investors and smaller institutions. Bond Tokens solve this through fractionalization, with each token representing a $100 face value and supporting up to 18 decimal places for precise trading and ownership.
While BTs do not represent direct ownership of the underlying bonds—meaning holders cannot redeem them directly in traditional markets before maturity—they provide full exposure to bond economics including:
• Proportional coupon payments distributed to token holders
• Full principal redemption at maturity through the burning mechanism
• Liquidity through Bondi's secondary markets and DeFi integration
• DeFi compatibility for yield strategies
Token Architecture and 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:
Examples:
• A bond from Alpha Corporation → btALPHA
• A bond from Beta Enterprises → btBETA
• A bond from Gamma Holdings → btGAMMA
Token Economics and Supply Mechanics
Supply Calculation
The total supply of Bond Tokens for each bond issue is determined using a precise formula that ensures accurate representation of the underlying bond value:
Total Supply = (Target Funding Amount × 10¹⁸) ÷ Purchase PriceThis calculation uses the Math.mulDiv function to maintain precision across 18 decimal places, following ERC-20 standards while ensuring mathematical accuracy in all token operations.
Example Calculation
Given Parameters:
• Target Funding Amount: $200,000
• Purchase Price: $90 per $100 face value bond
• Decimal Precision: 18 places (1 × 10¹⁸)
Calculation:
Total Supply = (200,000 × 10¹⁸) ÷ 90 = 2,222,222,222,222,222,222,222 unitsThis represents 2,222.222... Bond Tokens when adjusted for decimal precision.
Value at Maturity:
Each Bond Token converges to its $100 face value at maturity, resulting in a total redemption value of $222,222.22 for the complete token supply.
Semi-Permissioned Structure
Bond Tokens use a semi-permissioned structure that balances regulatory compliance with DeFi flexibility. This enables permissionless trading while maintaining strict compliance for interactions with traditional financial systems.
Permissioned Operations (KYC Required)
Minting Process
Bond Token creation happens only through participation in funding phases within the Primary Market. Users must complete identity verification through Bondi's User Dashboard before contributing to funding contracts. Once verified, their connected wallet receives permanent whitelisting for future minting operations without additional KYC requirements.
Coupon Redemption System
On scheduled coupon dates, Bondi receives payments in its regulated brokerage account, which are then converted to stablecoins and deposited into dedicated coupon disbursement smart contracts. Token holders can claim proportional coupon payments based on their holdings, but must maintain KYC verification to access these traditional finance interactions.
Principal Redemption at Maturity
At bond maturity, the final coupon payment and principal are received by Bondi, converted to stablecoins, and deposited into the burning smart contract. Verified token holders can burn their Bond Tokens to receive the full face value plus final coupon payment, completing the bond's lifecycle.
Permissionless Operations
Secondary Market Trading
Bond Tokens can be traded freely on decentralized exchanges. This permissionless trading enables price discovery and instant liquidity availability.
Wallet Transfers and DeFi Integration
Token holders can freely transfer Bond Tokens between wallets and integrate them into DeFi protocols including:
• Liquidity provision on decentralized exchanges
• Collateralization for lending and borrowing protocols
• Yield farming and staking mechanisms
• Portfolio management through automated strategies
• Cross-chain bridging for multi-chain exposure
Additional Features
Call Feature Implementation
Bond Tokens include call functionality that mirrors traditional bond market mechanics. When bond issuers exercise early redemption rights at predetermined call dates and prices, Bondi executes corresponding onchain actions through forced token transfers and retirement. Token holders receive automatic compensation through dedicated smart contracts, ensuring integration between traditional and tokenized bond markets.
Document Append System
The platform maintains documentation accessibility through an append feature that preserves all critical bond-related documents including prospectuses, brokerage statements, and regulatory filings. This system supports document updates while maintaining historical version control, ensuring transparency and regulatory compliance throughout the bond's lifecycle.
Risk Management and Compliance
Bond Tokens implement multiple layers of risk management including automated compliance checks and blacklist functionality for sanctioned addresses. This approach ensures that tokenized bonds maintain the same regulatory standards as their traditional counterparts while benefiting from blockchain transparency and efficiency.