The Ethereum Yield Curve

Watch defi capital markets mature before your eyes as the first ever ethereum based yield curves go live

Demo Video Live Demo Source Code

Description

This project allows users to collateralise and sell zero coupon bonds (called STRIPs in trad-fi). This project provides one of the most important money legos in the Ethereum defi ecosystem. Bond sellers continue to collect yield generated by their funds in AAVE before the bond matures. This provides the ability for defi capital markets to mature far beyond their current point. With the creation of zero coupon bonds for Ethereum based assets there exists a well defined yield curve for all ethereum based assets. This allows for better understanding of the time value of ethereum based assets. One of the most interesting applications of this project is that it provides anyone the ability to construct an ERC20 token with any cashflow structure imaginable . One could even create a synthetic United States Treasury note that pays out in DAI. This project puts the arbitrage between traditional finance and defi on full display. Yield in defi has been much higher than yield in cefi for a long time now but the excuse has always been "oh well defi yields will crash and burn tomorrow, therefore I won't deploy my capital today". If this is true there is no better way to express that opinion by a long bond trade. This project opens up the door to next age of capital flows into defi.

How It's Made

This project is built as an abstraction on top of aave aTokens. To make this project work we needed to wrap aTokens into 1 token that could be redeemed for an increasing number of aTokens rather than just using aTokens themselves, because constant increases in balances would lead to some technical problems. Wrapped aTokens may then be deposited into one of the capital handler contracts (capital hander contracts are contracts which handle distribution of funds for bonds of a specific maturity and payout asset), in return users are minted ZCB tokens and a collateral balance. Users may redeem ZCB tokens along with collateral for aTokens at any time. If a user sells their ZCBs they will continue to collect the yield generated by their collateral up to the maturity date at which time ZCB holders may redeem their ZCBs 1:1 for the underlying asset. The beauty of this project is that it rests entirely on top of aave aTokens and does not need to make any complicated calls into any other contract. This contracts for this project were written in solidity.

Team

Max Feldman
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