Bond Farming is the latest paradigm of on-chain financial derivatives innovation presented by iZUMi Finance based on the team's deep understanding of traditional finance and focused research in the DeFi industry. As a bond issued by iZUMi Finance for on-chain financing, it combines not only the model of convertible bonds issued by companies in traditional finance but also the model of on-chain over-collateralized stablecoins. iZUMi Finance issues bond certificates in the form of iUSD, a USD stablecoin, for institutions providing on-chain funds.
In the traditional financial industry, a convertible bond is a type of bond that can be converted into shares of the bond-issuing company, usually at a lower coupon rate. Essentially, a convertible bond is an option added to a corporate bond issue that allows the purchasers to convert the purchased bond into the stock of a specified company within a specified time period.
Based on the special token instrument and over-collateralization mechanism in the DeFi space, iZUMi pioneered the first convertible bond denominated in USD - iUSD (iZUMi Bond USD). It is different from the well-known concept of USD stablecoin, and it abandons the systemic risk of algorithmic stablecoins, using transparent on-chain funds managed by smart contracts and multi-signature wallets as the over-collateral to back up the value of iUSD. And iZUMi's convertible bonds issued through Solv Protocol support investors to convert to iZi tokens at a specific price at maturity, so that investors can also enjoy the potential investment return from iZi token appreciation.
The on-chain liquidity revenue captured by the iZUMi platform is the most direct support for Bond Farming investors' returns. Bond Farming is a structured method of liquidity mining, providing risk-free earnings to bondholders. By guaranteeing the principal and interests paid to the investors, Bond Farming has set a paradigm shift in liquidity mining. The revenue generated by Bond Farming will first be used to repay the investors and then reward market makers.
Here iZUMi also draws on an important investment model in traditional finance - a multi-tiered investment product that provides a stable low return for investors with low-risk tolerance and a volatile high return option for investors with a high-risk appetite. In the Bond Farming designed by iZUMi Finance, institutional investors who provide investment funds directly through the purchase of bonds are said to be the investors who seek stable income in this system. The iZUMi project side and the professional market makers using iUSD are the investors who seek a high-risk appetite and high return profit margin.
This model not only greatly improves the efficiency of capital utilization, but also provides participating parties with investment options that meet their usage needs based on DeFi's on-chain smart contracts, making it a cutting-edge innovation in the DeFi on-chain liquidity space.