BondAppetit: Proposal to create a Standard Vault with a collateral ratio of 100% and a stability fee of 3%

References

Website: https://bondappetit.io/
Whitepaper: https://bondappetit.io/whitepaper
Github: bondappetit · GitHub
Developer docs: BondAppetit
News channel: Telegram: Contact @BondAppetit
Community chat: Telegram: Contact @BondAppetitEn
Twitter: https://twitter.com/DeFiBonds
Security audit by HashEx: public_audits/BondAppetit report.pdf at 32a680c5b8f3a784ef3273c324e0841341f3abc2 · HashEx/public_audits · GitHub
Security audit by MixBytes: audits_public/BondAppetit at 4fc7d333e3df57586e0f96cc551819e2c93f3ae9 · mixbytes/audits_public · GitHub
USDap token contract: 0x9a1997C130f4b2997166975D9AFf92797d5134c2
BAG token contract: 0x28A06c02287e657ec3F8e151A13C36A1D43814b0

Proposal for MakerDAO

A typical MakerDAO storage has a collateral ratio of ~150% and a stability fee of 8%. These parameters ensure the security of the protocol and its support, since the main loan facility is a highly volatile cryptocurrency.

For adding real-world assets to make economic sense, the following parameters are required:
— Collateral ratio: 100%
— Stability fee: 3%

This rate is roughly the same as the rate on low-risk bonds. The parameters may seem grossly underestimated, but for MakerDAO, it is as safe as it gets. By default, MakerDAO works with volatile cryptocurrencies. This implies the inclusion of protective mechanisms through overcollateralization. BondAppetit, on the other hand, works with debt securities, which have been used as a means of value retention and savings by large companies for many years. Basically, we propose to optimize the existing debt securities lending process through integration with the cryptocurrency ecosystem and MakerDAO, while redirecting the coupon yield from bonds to MakerDAO.

Most of the coins that are used as collateral in MakerDAO are regular ERC-20 tokens, and the task of compensating for the losses is delegated to MakerDAO. BondAppetit has an entire DeFi protocol dedicated to its stablecoin with its own mechanisms for compensating and tracking protocol imbalances. In case of an imbalance, the protocol automatically compensates for losses from reserves and sell its governance tokens.

BondAppetit borrowers must meet certain requirements: be a regulated organization with licenses, be able to exchange cryptocurrency for fiat in large volumes, etc. No crypto borrower can offer such guarantees.

The overall size of the global bond markets, in terms of USD equivalent notional outstanding, is more than $130 trillion.

What is BondAppetit?

BondAppetit is a DeFi protocol for business loans. Businesses can borrow money (in fiat as well as in crypto) from the protocol, providing bonds with fixed income as collateral. A loan can be made in two ways: through loan agreement, and through a sale and purchase agreement. BondAppétit is a part of the Ethereum ecosystem.

BondAppétit issues two native tokens — the BondAppetit USD (USDap) and the BondAppetit governance token (BAG).

What is USDap?

USDap is the native stablecoin of BondAppetit. It is built on Ethereum and is fully backed by real-world assets (yield-generating bonds). The bonds are stored by a licensed custodian in a stable jurisdiction. Anyone can check their availability any time online at BondAppetit. The information is transmitted from the custodian and is digitally signed making data spoofing impossible.

A number of RWA-backed assets are now in the process of onboarding to MakerDAO:
https://forum.makerdao.com/tag/rwa

What is BAG?

BAG is a governance and a reward token, which is used to vote on-chain and to collect the bonds’ interest in dollars. Technically, it is an ERC-20 token and is based on the Compound Governance system — a recognized industry standard with the highest rate of transparency and security. Any member of the BondAppetit community with more than 1 million BAG tokens can initiate a governance proposal.

BAG had a gradual and fair launch. 100 million tokens will be distributed within two years. 65 million of them are reserved for the community.

Team

The protocol was built by a team of coders, lawyers, and financiers, who worked at and with the most well-known global corporations. The key founder is Artem Tolkachev, a former head of the Blockchain Lab at Deloitte. One of our advisers is Sasha Ivanov, CEO of Waves.

Project history and plans for the near future

BondAppetit was launched on April 5, 2021. In the first few days since launch, the volume of locked funds reached $10 million.

Over the ensuing several months, BondAppetit reached several key milestones:

  • BondAppetit established its first partnership to help increase the emission of the USDap stablecoin. The partner is the EAST.Finance, the first protocol targeted at large businesses. EAST is a part of Waves, a massive crypto ecosystem with a market cap over $2 billion. The EAST token is partially backed by USDap.

  • BondAppetit acquired a portfolio of corporate bonds to fully back the USDap. The USDap is currently backed by bonds of the following companies: 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%: BondAppetit

  • BondAppetit started to distribute profits generated by its bonds’ portfolio among BAG token holders. To be eligible for receiving payments, token holders have to stake their tokens in a special contract for 3, 6 or 12 months. The income is accrued for each block and distributed in USDC (in the future, the protocol will transition to making payments in USDap). The current APY is above 8%.

  • BondAppetit has distributed more than 10% of all BAG token emissions among its liquidity providers. To become fully decentralized, the protocol has committed to distribute 65% of total BAG supply among the community: https://bondappetit.io/whitepaper#21

  • In October 2021, BondAppetit raised $350,000 from the Digital Fortress investment fund. The fund retains an option of acquiring more BAG tokens throughout the year.

Until very recently, the value of the protocol was based on expectations. Now, as the protocol proved its business model, has stable cash flows, acquired collateral to fully back its stablecoin, started distributing profits to token holders, and secured the first investment round, BondAppetit is ready scaling. The key task now is to grow the supply of USDap. The protocol plans to achieve this in part by establishing partnerships and attracting investments.

The demand for decentralized stablecoins with robust and transparent collateral is insatiable. Many institutions and protocols are in need of such assets.

The stablecoin market is currently led by two mainstays: Tether and Circle. Tether is centralized and notoriously opaque. The large portion of their assets consists of commercial bonds. But no one knows for sure whether USDT is fully backed and if underlying assets even exist. Tether has been a source of FUD for many years.

Circle is more transparent and willing to comply with regulators. Its stablecoin is perceived as less risky than USDT, but the impression is deceptive. Circle strives to become a de-facto U.S. parastate entity. Circle openly admitted that they can freeze any USDC account with a flip of a switch.

For its own good, the crypto market needs to shift to decentralized stablecoins. Centralized stablecoins are too much of a risk.

A few words on market size. The market for business loans is enormous. The corporate loans and short-term liquidity markets are worth tens of trillions of dollars.

Some TradFi companies are already looking for ways to connect decentralized finance and traditional debt instruments. Back in September, Société Générale applied for a $20 million MakerDAO loan using bonds as collateral:

BondAppetit seeks to become a bridge between DeFi and the traditional debt financing market. The protocol has the necessary infrastructure and is now poised for scaling.

Bottomline

We propose to create a Standard Vault with a collateral ratio of 100% and a stability fee of 3%. It will be backed by the USDap stablecoin, which, in turn, is backed by real-world assets with fixed periodic income.

There’s actually a template we tend to use for collateral onboarding. You can find it here.

I’d maybe start by answering some of the questions there :slight_smile:

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USDAP has varied in price from $.72 to $1.10 over the last month, currently about .83, with a total market cap of $920k. Do you agree?

USDAP has varied in price from $.72 to $1.10 over the last month, currently about .83, with a total market cap of $920k.

We are aware of this issue, and we will address it :slight_smile:

Fine, but when you complete the collateral onboarding template @LongForWisdom directed you to, be careful about using terms like stablecoin without necessary qualifications so that assertion is not deceptive.

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Sir, are you also aware the Delta Air Lines Bond US247361ZZ42 that you have listed as a collateral type had a Cash Tender offer back in July? And how do you pay out a 15% yield on a note that currently pays around 7.34%?

But yes, as you can see that’s a lot of slippage up there :point_up_2:hopefully your team is working on tightening that spread/liquidity.

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The USDap exchange rate has been stabilized

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Very nice, well done on quickly fixing that issue.

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@ElProgreso

If you look on the website regarding the yield it is correct. The 15% you’re referencing is the split of the total % of bonds 15% of 100%, believe.

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