The month-long ETHOnline hackathon is coming to an end, and a number of very interesting new DeFi projects have emerged. This article will briefly introduce a DeFi fixed income project The Ethereum Yield Curve.
The Ethereum Yield Curve allows users to mortgage and sell zero-coupon bonds (called STRIP in Trad-fi, namely principal and interest separation bonds). The emergence of DeFi bonds will also become an important part of the currency Lego in the Ethereum DeFi ecosystem. Before the maturity of the bond, bond sellers can continue to obtain the income generated by their funds in Aave, allowing the DeFi capital market to obtain a maturity far beyond its current point. Since the project uses Ethereum-based assets to create zero-coupon bonds, all related assets have a clear yield curve, which can better allow investors to understand the time value of Ethereum assets.
One of the interesting applications of this project is that it allows anyone to build ERC20 tokens with any cash flow structure, and even create synthetic U.S. Treasury bonds to pay interest in DAI.
The project fully demonstrated the arbitrage between traditional finance and defi. For a long time, DeFi’s yield has been much higher than CeFi, but many people have always held a view: “DeFi’s yield will collapse tomorrow, so I will not use my funds to invest in DeFi.” Long-term bond trading will be A best application to refute this. It can be said that this project opened the door for capital to enter the next era of DeFi.
Project construction ideas
The project is constructed as an abstraction on top of the Aave loan asset aToken. In order for the project to work properly, we need to wrap aToken into 1 token, which can be used to redeem the ever-increasing aToken, not just aTokens itself, because the continuous increase in the balance will cause some technical problems.
The packaged aToken may be deposited into one of the capital processing contracts (the capital processing contract is used to process the distribution of funds for bonds and payment assets on a specific maturity date). In return, the user receives minted ZCB tokens and mortgage balance. Users can exchange ZCB tokens and collateral into aTokens at any time. If users sell ZCB, they will continue to receive the proceeds from their collateral until the expiry date. After expiration, ZCB holders can redeem the underlying assets with their ZCB 1:1.
The project is completely based on aTokens and does not require any complicated calls to any other contracts. The contract language of this project uses Solidity.
