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Importance to the Space

The first globally accessible and censorship resistant fixed income instrument
An "Internet Bond" can provide a similar role as US Treasury bills do in traditional financial markets. Providing the collateral backbone for DeFi as a censorship resistant and yield-bearing asset, as well as transactional money on centralized exchanges.

Why the US Treasury is the most important financial instrument on earth

The $30tn US Treasury market is the largest, most liquid, and most important financial market on earth, acting as the foundational collateral for funding financial balance sheets, the reference pricing rate for every financial asset on earth, as well as the FX reserve asset for international sovereign entities.
This is due to its unique qualities:
  1. 1.
    Stability
  2. 2.
    Liquidity
  3. 3.
    Yield
This allows US Treasury Bonds to act as:
  1. 1.
    Transactional Money
  2. 2.
    A Store of Value and Savings Instrument
  3. 3.
    Pristine Collateral
Yet to date, an analogous asset has not existed within crypto. Why?

Why the Internet Bond can be the most important instrument in DeFi

stETH and USDC serve different roles within the DeFi ecosystem, but neither alone are the solution for a stable yield-bearing collateral asset. USDC currently functions as the most important asset within DeFi, while all major exchanges are heavily reliant on USDT as quote & settlement assets for their order book markets.
This is despite their weaknesses relating to:
  1. 1.
    Centralized custody risk
  2. 2.
    Fully internalized economics: "return-free risk"
  3. 3.
    Fundamental reliance on the US Banking System
Combining the qualities of stETH with a delta hedge to achieve a synthetic dollar backing for USDe allows for:
  1. 1.
    Transactional Money
  2. 2.
    Store of Value
  3. 3.
    Stable Backing
  4. 4.
    Censorship Resistance
The Internet Bond therefore combines the relative stability of existing stablecoins with the censorship resistance of stETH. Users in permitted jurisdictions are able to stake their USDe to receive stUSDe to access yield generated by the protocol. USDe can therefore play an important role as a reserve asset supporting other DeFi applications that require backing (for example, stablecoin issuers) or as a collateral asset on money markets.
Last modified 16d ago