Free standard for issuing and
tokenizing debt instruments
Being inspired by the @dGoods project we decided to create dBonds standard. dBonds is an open source and free standard for creating virtual debt instruments which may or may not have collateral inside and can represent a traditional (not collateralized bond); a bond, collateralized by an off-chain asset (e.g. real fiat-nominated bond), or a bond collateralized by on-chain collateral locked in dbond smart contract.
Another interesting implication of dBond protocol is constructing instruments similar to traditional derivatives (call and put options). dBonds standard doesn’t have any margin call or liquidation mechanics, all incentives are based on risk-profit profile.
dBonds offers a decentralized lending market. We believe, there is no more fair and efficient pricing than the one provided by market equilibrium, so any price or interest rate inside the protocol is decided entirely by market agents, not by any third party. As traditional bonds, dBond must be paid off or can be defaulted which makes collateral (if exists) available to a bond holder.
Imagine you want to buy a call option on EOS/USD with strike price, say, $10 and expiration date 1, December 2019 That means, if at the 1, December 2019 the EOS/USD price is x and x > $10, you receive (x-10) as profit, otherwise nothing happens with you. You make a deal with someone and pay, say, 3$ for having an opportunity to earn (x-10). You are welcomed to learn more about options if that sounds new to you. In dBonds terms that means the following. Imagine current EOS/USD price is 5$, you buy 1 EOS for $5, lock it as collateral in the dBond, use $10 as a redemption price and sell it on the market for $2 (instantly "paying" $3 for the deal).
If x hapends to be greater than $10, you redeem the dbond for redemption price $10 (which is equivalent to use the right to buy underlying asset at strike price) via smart contract, get your locked EOS back and sell it on market for x, earning (x-10). Otherwise, there is no incentive for you to pay off for the bond, it goes through default, so in total you spent $3 = $5 - $2, your counterparty receives locked 1 EOS.
So, when selling the dbond you participate in the call option trade at a buyer side, having the right to get collateral back at redemption (strike) price.
The same logic can be extended for the put option trade.