More importantly, this program affected the actual financial protocol we are building. It was the precursor to the Standards that Akin built for BarnBridge (and a major reason we brought him on full time). Most of what we’ve done in crypto & DeFi from 2016–2020 had to do with asset-based products (ERC-20s). You can think of the fungibility of ERC-20s as being similar to equities or commodities (albeit I am in no way suggesting ERC-20s are equities here). What I mean by that is that you can own 1 ounce of Gold or 1 share of Tesla, and for the most part, that is 1 to 1 fungible with another ounce of Gold or another share of Tesla.
Fixed income and debt-based products are completely different from this in traditional markets. Illiquid debt essentially means non-fungible. It’s also not easy to just sell a mortgage 1 to 1 to another person. A Ford 5% coupon AAA-rated Bond can have many different issuance dates, maturity dates, and rights attached to it. This is very different than how an ERC-20 operates.
So when we release the SMART Yield product in February, you’ll see that the senior tokens are essentially NFTs. I’m working with some groups to build an interface for liquidity on this (since non-fungible can often mean not-as-liquid) but it’s important to note that no sToken will be 1 of 1 identical to another sToken. However, what is interesting about them is that they represent proofs of liquidity as your risk/reward exposure to a share of a cash flow that is paid out as an ERC-20. This makes them more fungible because, with good standards, you can figure out exactly what is in the representative NFT. We may have figured this out on our own without the community NFT program, but it definitely was a good start in our exploration.
I think it’s important to note that we also used this knowledge to champion standards with Opium (and in conjunction with Aave) where we essentially signaled to the industry: “hey not all of these protocols are issuing debt-based instruments the same way and it’s going to create a mess for secondary markets if we don’t start thinking about this.” While it may be boring and not as fun as the “MeMeZ” it’s absolutely imperative we get this right as an industry and some of the bigger players in the space from liquidity providers to blue-chip protocol leaders realized we are here to build for the long haul and we are thinking about the types of things people should be thinking about.
Andrey from Opium said it best “anyone can create a ponzi token — we’re trying to create standards that show we’re planning to be here for years and we want to create structures for new participants to come into the market and build without having to figure this all out themselves.”
We think this is a major head start to how NFTs and DeFi collide as DeFi Squared (DeFi²) enters into the period of D64. I don’t think anyone but a few know what I mean by this paragraph so… more to come of that in the Bond.Bet article — stay tuned.
So while the BarnBridge ERC-721 was fun, and we are sunsetting the program… it will live on in our products & our community.
And we think that is pretty cool.