How It Works
This page provides an overview of Solv's bond market.
Solv Protocol provides the first on-chain bond market that bridges TradFi with DeFi, featuring two types of bonds: Bond Voucher and Convertible Bond.
The Bond Voucher is a debt SFT tailor-made for crypto institutions such as market makers, VCs, or asset management protocols, or DAOs seeking to bootstrap liquidity, exercise market-neutral trading strategies, or fund operations.
The Convertible Bond works similarly to the Bond Voucher except that it has embedded convertibility by which the lender can convert the bond into the borrower’s token collateral under certain circumstances. DAOs or protocols that have treasury diversification and other general financing needs and want to attract the lenders with an asset's upside should consider issuing a Convertible Bond.
Solv's Bond Market features two components, Issuances and Trades, each serving unique purposes. Read below to find out what they mean.
Issuances provides a permissionless, primary-market solution for borrowers to issue a bond to raise funds as well as a platform for investors to invest in a fixed-income asset. The issuances platform works similarly to a traditional primary market except that Solv levels the playing field in investing for both retail and institutional investors. Borrowers also have the optionality to whitelist lenders of the issuance.
Bond listings on the issuance platform (sometimes called Bond Sales) are usually active for several hours to several days, during which investors can purchase a fraction of the bond sale they prefer.
As opposed to the issuance platform, which is accessible when there is a sale, users with bond holdings may cash out their assets for liquidity in the permissionless secondary market that is available 24/7. Investors with combinable holdings may combine or fractionalize the asset before selling them (perks of the semi-fungible tokens). As in an NFT marketplace, bond owners can set their own price for a listing, and the seller is charged a 1.5% fixed fee for the value sold.
Solv Bonds (Bond Voucher and Convertible Bond) offers immense benefits to all participants of the on-chain money market. Read below to explore the specific perks of using the Solv Bonds, whether you're a borrower or a lender.
Getting funds in DeFi can be difficult, especially if your financing is on a timetable and your rate isn’t great. With Solv’s robust ecosystem of lenders and the platform subsidy†, you can get funded in as little as days. Even hours.
Customize your interest type (fixed/floating-rate, zero-coupon), notional (amount), listing date, closing date, coupon rate, and even currency to borrow in. A promising DAO can add convertibility to the bond issuance, by which the investors can fully or partially convert the bond into the native token to enjoy the upside.
Lenders not only want to get paid back on time, but also want to know they’re getting paid back on time. At Solv, you can easily exercise the optionality – custody, insurance, and/or collateral – to reassure your lenders that you will make good on your promise.
Bond SFT is great for bootstrapping liquidity, exercising market-neutral trading strategies, funding operational expenses, or diversifying treasury. It doesn’t matter if you are a crypto market maker, VC, blockchain asset manager, or DAO.
Issuing a debt should never have to be complicated. Issuing on Solv means you are minting a unique, tradable digital asset, which should be done in just a few clicks. It’s 100% stress-free.
The safety of investors’ assets is a top priority for us. Solv integrates the optionality for the borrower to use reliable, independent custodian providers to secure and protect investors’ assets. Major custody solutions offer reduced risk and greater protection against theft, loss, and internal misuse of funds, and also have insurance†† that can cover potential losses due to theft or other causes.
One of the greatest advantages of peer-to-peer lending over DeFi lending pools is the unmatched level of transparency when it comes to the use of funds. At Solv, each borrower is required to provide full disclosure of how the assets will be used and for how long prior to issuing debt, effectively protecting investors from information asymmetry or any backroom deals.
The Solv Bond provides fixed-income assets with convertibility into an asset. It allows investors to not only earn a return at a competitive rate but also have the option to exchange their full or partial bond for an asset (e.g. a native token). Through this, investors can benefit directly from the future valuation of a tokenized borrower while earning a steady income†††.
As a parallel to Solv’s bond issuance platform, Solv Marketplace provides a secondary market for bond purchasers to cash out their investments early, fast, and permissionlessly.
Solv is the first institutional money market that incorporates independent, third-party credit rating systems currently not available in the crypto asset market. Such a system takes a balanced and objective view of the borrower’s immutable on-chain financial history, ensuring that borrowers remain diligent in maintaining a high credit rating and that investors make informed decisions about investing in a bond.
† The platform subsidy is offered in $SOLV token to incentivize eligible issuing entities under special circumstances. For further inquiries on how subsidy at Solv works, please reach out to our team.
†† The custody solutions available to the borrowers via Solv’s bond issuance include Binance Custody, Cobo, OKX, and other custody providers. Specific custodian terms of these services, including the insurance coverage, may vary. Should ambiguity arise, the terms of a given bond issuance shall prevail.
††† Embedded convertibility is available only for selected issuances via Solv Protocol. Please check the terms of your target investment for details about earning an upside.