Here’s How DeFi Protocols Lay the Foundation of an Unprecedented Bond Market

This DeFi project aims for immediate and low-cost settlements in the bond market, a feature not observed in traditional markets.

The global financial market comprises an expansive and sophisticated structure where investors meet various asset classes. Among these investment alternatives, the bond market is attractive for those seeking stability and reliability. A bond is a debt instrument representing the loan the investor gives the debtor and can be issued by companies, governments, and even individuals. However, traditional bonds may not be well-suited for everyday investors due to their complexity demanding advanced financial knowledge. This is where blockchain-based bonds step in, assisting investors seeking predictability while diversifying their investment portfolios.

Blockchain-based digital bonds are a progressive evolution that promises increased accessibility, efficiency, and transparency. Digital bonds streamline the issuance, trading, and settlement processes, mitigating traditional barriers to entry. The technological leap in the bond market allows more investors to participate in the bond market without friction. Digital bonds are a decent choice for those seeking a more user-friendly and inclusive financial experience.

Creating a unique bond market

Secured Finance, an interbank-grade DeFi protocol for fixed-income markets developed by Swiss company Secured Finance AG, aims to create a bond market that has never existed before. Secured Finance accomplishes immediate and low-cost settlements, a feature not routinely found in traditional markets. Every transaction becomes traceable on the blockchain, empowering market participants to make better-informed decisions.

As widely recognized, the cryptocurrency market is known for its high volatility and cannot provide investors with a stable yield model. However, Secured Finance introduces a novel approach to navigating volatility and fostering a stable environment for long-term investment by utilizing yield curves and fixed interest rate markets.

The yield curve illustrates the changes in interest rates across different timeframes, aiding investors in anticipating future market trends and making well-informed investment choices. Its significance extends to the pricing of derivative products, facilitating more intricate financial transactions and enhancing overall market depth. Moreover, the yield curve empowers investors to make more effective risk management strategies.

Transparent transactions without sacrificing scalability

As the backbone of the financial system, bonds facilitate capital formation and serve as a barometer for economic health. However, traditional networks have relied on multiple centralized systems. Secured Finance intends to revolutionize the centralized structure by conducting all processes on-chain through smart contracts. “By relying solely on on-chain, we provide faster and more transparent transactions without sacrificing scalability,” explained Masa Kikuchi, Secured Finance AG Founder and CEO, adding: “Our approach is more stable and efficient than other projects that adopt off-chain elements.”

The protocol strives to establish a fresh iteration of the DeFi market utilizing Bitcoin (BTC), Ethereum (ETH), USDC, and Filecoin (FIL). Secured Finance seeks to overcome challenges related to gas costs and processing capabilities through an innovative technology known as lazy evaluation. The lazy evaluation manages the order book efficiently by performing calculations only when necessary.

Secured Finance protocol incorporates traditional market clearing mechanisms into the blockchain. Introducing a clearing counterparty between lenders and borrowers enhances transparency and transaction efficiency while preserving liquidity in primary and secondary markets. Secured Finance goes beyond merely introducing new financial products—it aims to revolutionize the very foundation of the financial market. The protocol significantly strides in moving the crypto market beyond traditional models.

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