The Next Step: Bonded USD ($USB)
From a commercial standpoint, our plan has always been to be a single-source DeFi destination for altcoins. As an earning hub for tokens considered to be less viable in the lending/borrowing space, we are entering unchartered waters. There is no real precedent and it was incumbent upon us to create viability.
Early on it was clear that our own ecosystem, independent of plug and play features, was a necessity. The creation of smart instruments demonstrated that there can be earning capabilities baked into attractive products that mirror some of the services being offered while adding a new wrinkle. From there, we needed to provide worthy incentive models for those allocating capital to the product and, although often overlooked, create a retention model for those users. As we’ve seen in farming and fair distribution, attention is often paid while tokens are being released into the wild, followed by a precipitous drop in interest and usage. Certainly, there’s been no shortage of interest in Bond and having the very best in technical partners was imperative. To date, this most important piece has been executed and is a key element to “future-proofing” our model.
The business of customer retention in crypto, on the whole, specifically DeFi, remains elusive to many projects. Currently, users who are moving into cash as a measure of de-risking (or for any reason for that matter) must leave the Bonded ecosystem to settle into their chosen stable coin. For us, this represented a business vulnerability. Once we’ve acquired a user and provided a value proposition that is considered favourable, it is not in our best interests to see them leave the network if they are merely responding to market conditions. It is certainly not a reflection on us and we would have to incentivize a converted user to come back or ask them to cross a virtual bridge once again. While it wouldn’t seem to be that much of a deterrent, it is a major faux pas in the business world. When someone has to re-enter, you are facing an uphill battle and Bonded Finance’s aim is to be seamless and comprehensive. Participants are certainly free to come and go as they see fit but it is our job to offer a solution to meet all their needs so they stay! Hedging risk is about as fundamental a move as exists in the space and an internal solution to allow borrowers and lenders to stay in-network became a clear and pressing need.
Introducing Bonded USD
Bonded USD (USB) is our network’s new altcoin-backed stablecoin. By having a trusted Bond Network stable coin, our users can freely take risk-off measures with a single click of the button.
Although it is not plainly obvious, as cryptocurrencies gain traction and adoption grows, it must begin with a potent population of stablecoins. After all, if there is no reference or “tether” to our antiquated FIAT system, we simply would not know where to begin. As a standalone ecosystem, Bonded Finance will certainly grow and benefit from having our own stable currency. Bonded USD is for those users who contribute to and utilize the network. In truly democratized finance (can you say DemFi?), those users will reap the benefits and rewards.
Financial primitives moving onto Ethereum’s mainnet is happening at breakneck speed. We are seeing both watershed movements along with gratuitous activities. What is undeniable though is that financial inclusion is upon us. Gone are the gouging fees and barriers to entry popularized by banks that contributed to the inequality of distribution of the world’s wealth. There is innovation now as true Decentralized Finance offerings are unfurling while the strongest of our underpinnings gleaned from the world of traditional finance are slowly being instituted.
At the heart of financial primitives in DeFi is stablecoins. Crypto will continue to be volatile as it makes its way forward and having stable assets that guard against this volatility is foundational. The importance of stable assets that are not governed by centralized authorities is an absolutely needed step towards a free financial world. USDT, for example, remains at the fore of centralized stable tokens, and while its popularity is undeniable, it is not winning any popularity among those advocating for a decentralized world.
With traditional primitives in crypto — stable dollars, lending and borrowing services, synthetics and insured products, we now have a reference with which we can build upon and innovate. This is required for those of us who have grown up in a fiat currency dominated world. In addition to these bank governed stables, we have other protocols like DAI or sUSD which have crypto-backed designs, and most recently, elastic supply tokens governed by algorithmic mechanics in order to maintain a price peg.
Some will prove resilient while others may be worthy but fail to gain adoption. There are some two hundred stable coins in all and while this may seem excessive to some, the only measure by which they should be judged is the value that they can confer to their users. For Bond, having this essential primitive “in house” is added value and we are utilizing the crypto-backed model as it is both cutting edge, efficient and offers the community the most influence. As that value is demonstrated, we may seek out additional providers in order to spread adoption, however, it is initially being developed for deployment and service on our network. This alone is the rationale.
The BOND stable coin is altcoin-backed and we felt this provided the best technical foundation to provide decentralized stability. It operates similar to DAI’s model, issuing our stablecoins backed by collateral supplied by users. As a user of the Bonded platform, the security of knowing you can reposition your portfolio directly into USD in-network (in proportion to your token’s assigned LVR) is an achievement in guarding against risk exposure and commercially, an opportunity to retain customers. LVR is determined by a variety of factors that include the coin’s volatility. Therefore, a stablecoin would have an LVR of 100% and a very volatile, unpredictable coin, say, 10%.
Our existing BOND coin is the governance key that manages the Bonded USD minting Platform, enabling BOND coin holders to contribute in deciding which altcoins we list. This is just one of the innovations of our new stablecoin. We will slowly unveil new customisations as they near deployment.
Certainly, there is an additional value added that will reveal itself, such as the use of Bond USD as a trading pair and the ability to generate deeper pools of liquidity and demand for our lending assets, borrowers and partners. Bond believes we are no longer just a decentralised lending solution, we are taking all the steps to become a bonafide financial hub and provider, capable of powering modern finance.
Stay tuned for the deployment and further updates.