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Corporate Bond Markets on Solana

26/2/2023

Problem to Solve:

In the traditional world, the current process of issuing a corporate bond market is as follows: Planning & Structuring -> Underwriting -> Registration -> Marketing -> Pricing -> Closing -> Secondary Trading.

The notional value of the bond market is $128 Trillion, but the process is slow and inefficient, limiting the accessibility to a large number of retail as well as institutional investors.

Blockchains like Solana enable the automatic creation of efficient markets, solving for liquidity and accessibility.

Possible Solution:

There can be a few ways to solve this:

1. Issuance and tracking of Bond On-chain, Payments Off-chain:
- No Regulatory Hassle as an only ledger entry.
- Opportunity to onboard all existing corporate bond issuers to issue SPL bond tokens for greater transparency.
- The payments are done via Fiat, and no crypto is involved
- This model is easy to Implement and attract clients -> Later monetize

2. Both Issuance and Payments On-chain [Tokenisation of existing Bonds]
- The Investors can invest via USDC; it can be made permissioned to allow for KYC or accredited investors
- Utilizing existing protocols/Infra on Solana: Pricing of Bonds via AMMs, Streaming payments to bond investors, Multi-sig  -> Power of Composability
- Target clients can be: Large companies in tokenization-friendly jurisdictions looking to finance massive projects.
- This model will take time, but a massive opportunity.

The Platform: Bond as a Service
It should enable the creation of Bond Markets for anyone, and they should be able to configure based on the type of bonds, like vesting schedule, payment terms, and so on. The platform should be able to plug in or simply fork existing projects on Solana to leverage the already built markets Infra.The marketplace model (Amazon for bonds) can also be adopted, where the issuers can issue and sell their bonds to investors, but bootstrapping liquidity and regulation can be a challenge.

In case you are interested in building or supporting this - DM me at @yashhsm on Twitter/Telegram - happy to help/introduce.


Resources:

  1. Siemens issues corporate bond of $65M on Public chain
  2. Understanding On-chain securitisation
  3. Inspiration Projects: Bridgesplit, Bond Protocol, Ondo Finance
  4. A list of DeFi projects that have won Solana global hackathons in the past

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