Bandbox: DeFi Product on the Crypto Market

Bandbox
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Bandbox
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Developing a trustworthy platform is essential to attract users to the site, especially considering the high number of scandals that crypto markets have been grappling with. Some of the most prominent scandals in recent times include MyCoin Pyramid Scheme, Bitfinex Exchange Hack, and AsicBoost Controversy (planetcompliance.com). AN important user in the protocol shall be risk-averse small-scale cryptocurrency investors. To this end, the protocol will create value for small-scale investors by providing a platform where the investors can use their cryptocurrency holding to buy bonds that are issued by blockchain companies. The premise of value creation is that the platform will convert the risky cryptocurrency holding of small investors into more stable bonds. Notably, holding a bond transforms one from being an investor to a creditor. Given that bondholders are paid first when there is a default, small-scale investors in the platform will be able to avoid experiencing the losses associated with price fluctuations in the cryptocurrency markets. To ensure that the value generated from holding bonds is secured for small investors, Bandbox will implement three lines of defense against issuing company’s default risk. First, the platform will require the bond issuers in the platform to provide assets and collateral to serve as security for the bonds. Second, the initial margins due to the bond issuers will be used to protect small investors from default risk. Third, the issuers of a bond will be required to provide a guaranteed deposit to serve as security. Thus, in the primary markets, the small investor will benefit from the acquisition of less risky bond holding that minimizes the losses associated with fluctuating crypto-currency prices. In addition, the user will receive interest that will be paid by the bond issuer depending on the type of bond issued.
In addition to the risk-averse small investor, the issuing companies and those who have staked BND shall be the main customers of the platform given that they will contribute to the liquidity pool. Compared to the small investors, the BND holders and bond issuing companies are risk takers as they are willing to bear the risk of the platform’s liquidity pool. It is essential to attract more risk-takers to the liquidity pool to build the market’s confidence in the platform. A large liquidity pool will translate into more investment opportunities for small investors. The risk-taking user will benefit from the primary market by accessing capital that can be channeled to grow their company or undertake other income-generating activities. To this end, the platform’s primary market will serve as a source of capital for the risk-takers.
Further, the small investor will benefit from the price appreciation of bonds in the platform’s secondary market. To this end, Bandbox has implemented a smart contract that will facilitate bond trading in the company. In case a small investor wants to either add or dispose of a given bond, the platform allows one to initiate a buy or sell order. Oracle is the company responsible for determining the bond pricing in the platform. Thus, Oracle will provide the current prices of the bonds issued regularly based on available public information and the customer can decide whether to buy or sell more bonds in the secondary markets. The risk taker can also benefit from the secondary market by repurchasing some of its bonds before maturity to minimize the number of interests that it will pay upon the maturity of the bo...