1/ Re-Introducing the Internet Bond 🧵
Presenting our take on bringing a value-accruing, dollar denominated and censorship resistant savings asset to crypto:
@LexSokolin spoke with @leptokurtic_ on the topic:
🎧 open.spotify.com
📖 Full Piece:
mirror.xyz
Presenting our take on bringing a value-accruing, dollar denominated and censorship resistant savings asset to crypto:
@LexSokolin spoke with @leptokurtic_ on the topic:
🎧 open.spotify.com
📖 Full Piece:
mirror.xyz
mirror.xyz/0xF99d0E4E3435…
The Internet Bond
We develop the idea that staking ETH enables a digital bond with one important difference - we trans...
open.spotify.com/episode/5YTOq7…
Engineering the Dollar from ETH and Perpetuals, with Ethena Labs founder Guy Young
Listen to this episode from The Fintech Blueprint on Spotify. Lex chats with Guy Young - the CEO and...
2/ We develop the idea that staking ETH enables a digital bond with one important difference:
We transform and denominate the “Internet Bond” in the world’s dominant currency: the US Dollar.
We transform and denominate the “Internet Bond” in the world’s dominant currency: the US Dollar.
3/ Alarmists have forecast the death of the dollar for decades, yet there is almost no evidence of this decline.
65-70% of trade volume in 2000 was conducted in USD - it is more or less same today
The world claims it doesn’t want USD, but their actions don't match the rhetoric
65-70% of trade volume in 2000 was conducted in USD - it is more or less same today
The world claims it doesn’t want USD, but their actions don't match the rhetoric
4/ Whether it fits your bias or not, the only ubiquitous use case of a blockchain to date has been storage, transfer and settlement of digital USD
Everyone wants access to dollars, they just don’t want ones that can be unilaterally censored at the discretion of a single entity
Everyone wants access to dollars, they just don’t want ones that can be unilaterally censored at the discretion of a single entity
5/ Issues with bonds today:
a) Limited Accessibility
Permissionless blockchains solve this
b) Censorship
After US censored Russia's access to US bonds, the world has begun to recognize bond's censorship risk and has begun to unwind their holdings of US Treasuries.
a) Limited Accessibility
Permissionless blockchains solve this
b) Censorship
After US censored Russia's access to US bonds, the world has begun to recognize bond's censorship risk and has begun to unwind their holdings of US Treasuries.
6/ Taking on decentralized collateral in the form of stETH and a short ETH futures position of the same notional creates a synthetic digital dollar position.
Short funding + stETH gives the system backing an embedded yield that accrues value to the Internet Bond
Short funding + stETH gives the system backing an embedded yield that accrues value to the Internet Bond
7/ A short ETH perp position against stETH provides a floating rate reference point, while dated futures provide a fixed rate alternative over a defined maturity schedule.
The introduction of this risk free reference rate will unlock new interest rate swap products in crypto.
The introduction of this risk free reference rate will unlock new interest rate swap products in crypto.
8/ There is clear demand for yield-bearing dollar assets in crypto now with yields that match or surpass U.S Treasuries
sDAI and sFRAX launches added over $1.2bn to stablecoin supply and captured 1% of total stablecoin supply within 1 month
sDAI and sFRAX launches added over $1.2bn to stablecoin supply and captured 1% of total stablecoin supply within 1 month
9/ In a lower interest rate environment, it is quite likely crypto yields increase as their negative correlation takes effect and demand picks up for riskier assets.
The last time this happened was in 2021 and we saw a huge spread between crypto yields and bond yields.
The last time this happened was in 2021 and we saw a huge spread between crypto yields and bond yields.
10/ An Internet Bond in the form of sUSDe satisfies all of the prerequisites of a globally accessible bond: stable, value-accruing, USD denominated and permissionless.
11/ If the demand for a digital dollar asset with zero return, i.e centralized stablecoins, is >$120bn, we view an equivalent instrument that externalizes the return with users as an order of magnitude larger
And we look forward to bringing you this product soon
And we look forward to bringing you this product soon
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