The First Batch of Bonds Has Been Acquired. Phase 2 Is Now Here
The long wait is finally over! The first batch of bonds was acquired last week to back up the USDap stablecoin. In this article, we will cover all the key points you need to know: which bonds were purchased, the criteria applied for their selection, who will be acting as the depository, how the stability of the exchange rate of the USDap will be ensured, and how the economy of the protocol will be functioning during the second launch phase.
Which bonds have you acquired?
The bonds of eight issuers were purchased within the first batch for a total of $550,000:
• Nexa Resources
• Ecopetrol
• Delta Air Lines
• Ford Motor
• Xerox Holdings
• American Airlines
These are bonds rated BB / BB +, with maturity dates for 2026–2029 and coupon yields ranging from 5.38% to 7.38%. This month, the protocol will receive its first income from the Xerox bonds and will start distributing it among BAG holders.
The next batch of bonds valued at $750,000 will be acquired shortly. We will announce the acquisition later.
Based on what criteria were the bonds selected?
The bonds were selected based on several criteria:
• Maturity date not earlier than in one year;
• Coupon yield no less than 5.13%;
• Rating no lower than Baa3 by Moody’s, BBB by Fitch, and BBB- by S&P;
• The bonds must be liquid and emitted by an issuer from a stable country.
Where will the bonds be stored?
The bonds will be stored by Wise Wolves Finance, a Cyprus-based Investment Firm (CIF) regulated by the Cyprus Securities and Exchange Commission (CySEC) with license number CIF 337/17.
How is it possible to check the availability of the bonds?
It will be possible to check the availability of bonds at https://bondappetit.io/collateral starting from approximately August 4th. The information is transmitted from Wise Wolves and is digitally signed making data spoofing impossible.
How will the BondAppetit economy work during the second launch phase?
We have stated from the start that the launch of the protocol will take place in three phases. There have been no delays in the plan thus far. The acquisition of the bonds means the transition of the protocol to a new phase. BondAppetit is still at the MVP (Minimum Viable Product) stage, but is entering full operational mode.
During the new phase, the main task of the protocol will be to increase the issuance of the USDap stablecoin. We will step up marketing and start working on attracting new partners. Due to the lack of scoring mechanisms, DeFi loans are issued against a collateral ratio ranging from 110% to 300% or even more. By relying on the backing of real-world assets, loans in USDap can be issued with lower amounts of collateral. We expect that other protocols might be interested in partnering with BondAppetit.
The first partner is EAST.Finance — a new project from Waves, which is a large ecosystem with a market cap over $1billion. Half of 1 EAST will be backed by the WEST token with 250% collateral, and the other half will be supported by USDap. EAST.Finance is ready to launch, they were just waiting for the collateral for the USDap stablecoin to be present.
The coupon yield on the bonds backing the USDap will be distributed starting from August 2021. To receive the income, BAG holders must stake their governance tokens on a special contract for 3, 6 or 12 months. The longer the term — the greater the income. 45% of the coupon income will be distributed to those who lock their BAGs for 12 months, 30% — to 6-month stakers, and 25% — to 3-month stakers.
Example. The protocol acquired $1.3 million worth of bonds with an average coupon yield of 5.93%. The bonds will generate $77,090 annually. The cost of acquiring the bonds and maintaining the protocol is $26,700. The remaining money — $50,390 — is left up for distribution.
As of July 2021, ~10 million BAG tokens have been distributed. Assuming that 60% of the tokens will be locked in a contract, the income will be distributed as follows:
Below is a diagram of the structure of the BondAppetit economy during Phase 2. An increase in the issuance of USDap and an increase in the bond portfolio will increase the income of BAG holders, and this will push the exchange rate of BAG upwards. In turn, the growth in demand for BAG will help increase the emission of the USDap stablecoin.
Income is distributed in small fractions every block.
How will the stability of the exchange rate of the USDap stablecoin be ensured?
It is vital for the protocol to ensure a stable exchange rate for the USDap stablecoin. After the complete transition to the second phase of the protocol, we will be giving users the opportunity to burn their USDap stablecoins in return for an equivalent amount in USD transferred to their bank accounts. Such transactions require compliance with standard KYC/AML banking procedures. For exchange transactions to be completed, users will need to conclude an agreement with our counterparty. The minimum amount liable for an exchange operation will be $50,000 as OTC deals require some hassle KYC/AML procedures.
Tuning of the exchange mechanism will take some time. The launch date of the exchange mechanism will be announced separately.
Why invest in BondAppetit when you can just buy bonds or a bond ETF?
Greater security. If you buy the bonds and the issuer defaults, you will be left with nothing. With BondAppetit, a default is not that much of a disaster, since the protocol can acquire more collateral by issuing additional BAGs and selling them on the open market.
Higher income. The number of BAGs is limited to 100 million tokens, and the volume of loans and the issuance of USDap is not limited by anything. More USDap means more bonds, which means higher income for BAG holders.
What’s next?
Until now, the value of the BAG token has been based only on expectations. The protocol has a more solid foundation now that collateral has been acquired and passive income will soon be distributed. With such a foundation, it is easier to promote the project and attract investors. We are currently in talks with several business angels and venture capitalists who are interested in the protocol.
Stay tuned to our news and updates. And remember — the crypto market favors only patient investors. BondAppetit is still a very young project and we still have a long way to go.
Links
Website: https://bondappetit.io/
Whitepaper: https://bondappetit.io/whitepaper
Litepaper: https://bondappetit.io/static/media/bondappetit_litepaper.pdf
Developer docs: https://bondappetit.io/docs/
News channel (EN): https://t.me/BondAppetit
Community chat (EN): https://t.me/BondAppetitEn
News channel (RU): https://t.me/BondAppetitRuNews
Community chat (RU): https://t.me/BondAppetitRu
Twitter: https://twitter.com/DeFiBonds
