Structured Finance
This page provides an overview of structured finance with SFTs.
The Convertible Voucher is a structured product featuring a price range by which DAOs can offer a specific range of yields to investors. It allows anyone to create their own financial market for the asset they’d like to sell by customizing the payout curve.
Convertible Voucher: the Concept
The Convertible Voucher can:
- Receive (from the issuer) and lock native tokens when minted.
- Based on the relationship between the settlement price and a predefined price range, smartly calculate and issue:
- the full face value payout in native tokens or stablecoin if the settlement price is inside the price range
- Native token payout (amount = face value / upper bound) if the settlement price is above the price range
- Native tokens payout (amount = face value / lower bound) if the settlement price is below the price range
The Convertible Voucher is a convertible bond with an embedded price range that allows investors to enjoy multi-level returns depending on what the trading price of the underlying asset at maturity is. Issuers of Convertible Vouchers must back Vouchers with sufficient amount of tokens to repay investors if the settlement price drops too low.
Maturity date, face value and bond range are the main terms for the configuration of a Convertible Voucher.
A sample of a Convertible Voucher works as follows:
- Face value: $10,000.00
- Bond range: $5.00 - $10.00
- Maturity date: Dec 31, 2022
The key mechanism for this flexible solution is the bond range.
At maturity, while the token price is inside the predetermined bond range, the Convertible Voucher will execute like a zero-coupon bond.
Outside the range, this Convertible Voucher will be automatically converted into a redemption voucher for investors to claim the underlying tokens.
Fundraising without Dragging Secondary Market
By issuing Convertible Vouchers, DAOs could access to funds without directly selling their native tokens, thus averting any direct impact on the secondary market. As underlying tokens are locked up as collaterals in Convertible Vouchers, the trading of Convertible Vouchers has no effect on the trading volume of the secondary market.
Additional Chance for Higher Valuation
Funding via Convertible Vouchers will delay native sales for DAOs to develop maturely for the market side, and Convertible Vouchers' repayment periods also buy DAOs additional time to bet on future development with higher valuations - higher valuation means less sold tokens, and vice versa.
Customizable Structured Financial Product
The configuration of bonding and call option of a Convertible Voucher is highly customizable, along with other parameters of the voucher. This makes it possible for a DAO to create the perfect financial product for its unique needs, and establish its own derivative market.
Convertible Voucher is a structural product designed to leverage native tokens for DAOs, with customizable voucher configurations and payout curves. Selling tokens via Convertible Voucher with interest income and potential option income, issuers will obtain funds at a more optimal price, and investors will own native token investments in a low volatility way.
Solv provides a one-stop platform for creating, managing, and trading Convertible Vouchers for project teams:
- 1.
- 2.Then submit your token address, admin address to Solv team, and Solv will whitelist your token.
- 3.Once your token is whitelisted, you could mint and sell your own Convertible Vouchers. Please contact Solv for a detailed tutorial on issuance.
- 4.Holders could claim the underlying tokens out of the Convertible Voucher after its maturity. If your token price is inside the predetermined price range, you could choose the repayment token as the predetermined stablecoin (e.g. USDT), not your native token.
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