What is ERC-3475? Exploring Bonds on Ethereum Blockchain - A New Token Standard

Ishan Pandey: Please tell us about yourself and the story behind Debond?

Yu Liu: The protocol was initially developed by Yu and Sonbo. We are both chinese born French residents, previously studying in PSL. DeBond protocol was originally conceived as an upgraded version of DEFI yield farming system, providing extended settings such as LP fragmentation and derivatives creation, etc.. We believe that the native use case of smart contracts should be the financial derivatives. Since ERC-20 token can't fulfil this task, we propose a possible solution.

What we think is exciting about this project is that the update of the current yield farming system will bring more changes, possibilities and believers to the DEFI system, pushing DEFI to the next stage, where a more complex economic system can be designed using the ERC-3475 bond standard. We are expecting it to go beyond the boundary of our imagination. New protocols around decentralised options, derivatives and any other form of financial product, among many existing or non-existing such concepts. It has all the potentials needed to substantially increase the efficiency and computational complexity of DEFI. DeBond is an open-ended platform by design. We are looking forward to seeing a series of applications and use-cases built on top of the ERC-3475 infrastructure.

Hayek once said in an interview, “Freezing in its most primitive form, money was never allowed to be involved since its invention.“ We firmly believe that the Decentralised autonomous organisation or DAO is a possible answer to many social problems that we are facing in our current economic system. The Crypto-anarchism would allow the DeBond system to grow organically as a decentralised community. By assimilating developers and investors alike, the DeBond Eco-system will be evolving to a point that the collective intelligence will find an optimal solution to any problems that we will be facing.

Ishan Pandey: What is ERC-3475? Further, how does it work?

This is the new standard smart contract interface we created to make managing multiple callable bonds possible. Using ERC-3475 we can now store more information about bonds, launch more types of bonds, add new features and complete a wider set of functions as before, which is essential for the decentralized finance market.

The limitation of an older generation of standards such as ERC-20 is that they require the deployment of a separate token contract for each new type of token. With ERC-2475 issuing bonds with multiple redemption data is now possible. This is a real breakthrough that will help us to create a better infrastructure for the decentralized bonds market.

Ishan Pandey: What are decentralized bonds? How do they work and are they regulated products?

Yu Liu: Decentralized bonds are debt securities, having a function similar to that of a regular receipt in which the borrower receives money and undertakes to return it on a certain date. The fulfilment of obligations is guaranteed by a smart contract.

By issuing bonds, companies borrow money and then pay it back with interest. Of course, the company could take a regular loan, but then it would need to agree on the terms with the bank. As a rule, when it is necessary to raise debt capital, companies more often opt to issue bonds over loans.

For individuals, traders and investors, decentralized bonds are a way to diversify portfolios and take control of risks, since a smart contract guarantees the fulfilment of obligations by the issuer of the bond.

Decentralized bonds are regulated in the same way as other cryptocurrencies. If your country allows you to legally buy and sell cryptocurrencies, then you can safely use bonds. This promising product is an integral part of DeFi, but it is possible that it will be regulated in the future. A qualified investor status may eventually be required to purchase them.

Ishan Pandey: How does the smart contract for a bond work?

Yu Liu: Debond is a standard interface for contracts that manage multiple callable bonds. A single contract includes any given number of bond classes, bond nonce, bond balance of an address. This standard provides independent functions to read, transfer any collection of bonds, as well as allow bonds to be redeemed from the bond issuer if certain conditions are met. This token standard can replace current ERC-20 LP token. ERC-3475 has a more complex data structure, which will allow the LP token to store more information, and allow the developer to build more sophisticated logic for the redemption and reward system of the DEFI project in question.

This API standard allows for the creation of any number of bond types in a single contract. Existing LP token standards like ERC-20 require deployment of separate factory and token contracts per token type. The need of issuing bonds with multiple redemption data can't be achieved with existing token standards. ERC-3475 Multiple Callable Bonds Standard allows for each bond class ID to represent a new configurable token type, and for each bond nonce to represent an issuing date or any other forms of data in uint256. Every single nonce of a bond class may have its own metadata, supply and other redemption conditions.

Current LP token is a simple ERC-20 token, which has not much complicity in data structure. To allow more complex reward and redemption logic to be built, we need a new LP token standard that can manage multiple bonds, store much more data and is gas efficient. ERC-3475 standard interface allows any tokens on solidity compatible block chains to create its own bond. These bonds and derivatives with the same interface standard can be exchanged in the secondary market. And it allows any 3rd party wallet applications or exchanges to read the balance and the redemption conditions of these tokens. ERC-3475 bonds and derivatives can also be packed into separate packages. Those packages can in their turn be divided and exchanged in a secondary market.

New functions built in ERC-3475 Multiple Callable Bonds Standard, will allow the users to economize their gas fee spend. Trading and burning of ERC-3475 Bonds will also multiply tokens market cap, helping it to recover from recession period. Existing structures, such as AMM exchanges or lending platforms can be updated to recognize ERC-3475 bonds or derivatives.

ERC-3475 is a tokenized exchangeable asset. A bond contract can store the data of $2^{256}-1$ bond classes and of each class \(2^{256}-1\) bond nonces. Unlike a typical ERC-20 or ERC-721 token, an ERC-3475 bond is semi-fungible and multi-dimensional. Any bond nonce of a class is non-fungible from another nonce or class. It has an identified uint256 array, in which we can store the redemption time, interest rate, redemption conditions and other info.

Ishan Pandey: Tell us about your views on Web 3 and how is it different from Web 2?

Yu Liu: The difference is in the level of user engagement and the ability to get bogged down more deeply than today. The first version of the Internet had very simple sites, with contacts and text information posted exclusively by the resource administrator. The second generation of the Internet made it possible to post music, videos, photographs, information about yourself, and much more, completely independently, without the participation of their administrators.

We can listen to music, watch videos and communicate while staying on the same site. If another action is required, we need to leave the site at least for some time, for example, to turn on the washing machine, go to the banking application, check a messenger, go to work or school. To understand what Web 3.0 will be like, just imagine that you can do all of these actions within a single site or application called the metaverse.

Ishan Pandey: What are your views on Solana as an alternative to Ethereum for launching NFTs?

Yu Liu: Blockchain technologies and the cryptocurrency market are developing and moving forward thanks to the colossal competition and inexhaustible enthusiasm of many projects that are not afraid to do something new. Users benefit when young platforms such as Solana compete with Ethereum to solve the problem of scalability. At the same time, I have some scepticism about altcoins intending to become an alternative to Ethereum. Many Ethereum Killers were created but, since then, nothing has been heard of them.

Ishan Pandey: What are your views on Metaverse? Do you think it will break societal construct like social media?

Yu Liu: Social networks? They are in agony now, losing their audience. This is partly due to their privacy and monetization policies and partly due to pressure from messengers. This means they may die even before the launch of the first metaverses if they do not have time to reformulate themselves. As for social structures, here you are right, they will be rebuilt practically from scratch. We can imagine how this might happen, for example, by looking at the explosion of remote work services at the beginning of the coronavirus pandemic. Not everyone liked working and studying online, and using Zoom instead of meeting in person, but today people are getting accustomed to shopping and working without the need to leave home.

All social interaction is being transformed for online implementation in the vastness of the metaverses, and here ethical questions will inevitably arise that will lead to a reassessment of moral norms, but perhaps this is an integral part of progress. Previously, online dating seemed like something inferior, but now many people find partners on the Internet.

Ishan Pandey: According to you, what new trends are we going to see in the blockchain industry?

Yu Liu: I don't think that in the near future, DeFi, NFTs, and the metaverse will fade into the background under the pressure of new trends. Nevertheless, I expect the emergence of popular cross-chain solutions, thanks to which different blockchains will be integrated into one network. In the future, this network will be the basic infrastructure for Web 3.0 and the metaverse.

Disclaimer: The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence, asking the right questions, and equipping readers with better opinions to make informed decisions.