Why Tokenizing Corporate Bonds on the Blockchain Will Scale DeFi to Trillion-Dollar Size?
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Why Tokenizing Corporate Bonds on the Blockchain Will Scale DeFi to Trillion-Dollar Size?
7 Reasons Why Tokenized Corporate Bonds (On-Chain) Are Worth Watching
Navigating Web3 tides with focused insights
Written by: Ishan B
Compiled by: TechFlow
DeFi is disrupting a multi-trillion-dollar market that no one is talking about: tokenized corporate bonds (on-chain).
The current bond market has a nominal value of $128 trillion. And DeFi will be at least twice that size.
Here are 7 reasons why tokenized corporate bonds (on-chain) are worth watching:
1. Faster
The current process for issuing corporate bonds is:
1. Planning & structuring;
2. Underwriting;
3. Registration;
4. Marketing;
5. Pricing;
6. Settlement;
7. Secondary trading.
On-chain bonds can drastically reduce time across the following steps:
-
Planning/structuring: smart contract templates for issuance;
-
Underwriting: initial bond offering;
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Registration: global on-chain access;
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Pricing: AMM models;
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Secondary trading: DEXs.
2. Cheaper
Underwriting fees range from 0.5% to 3% of the issuance amount. Fees for distribution, consulting, registration, credit analysis, legal/accounting—all driven to zero by smart contracts.
3. Accessible
DeFi can open up two aspects of the bond market:
-
Issuance: Over time, the cost of issuing bonds will trend toward zero (as DeFi tends to do with financial services).
-
Purchase: Open the market to more buyers (lower barriers).
U.S. households typically hold around 3% of corporate bonds. Retail investors could add significant liquidity to the bond market—if access were easier. By reducing intermediaries (bankers), bonds become more efficient for both issuers and investors.
4. Value Creation
If more than twice as many users access bonds and issuance efficiency improves by over 2x (due to lower barriers), the corporate bond market could grow fourfold or more.
Enabling businesses to quickly raise debt from a broader investor base will allow them to invest more in their operations and build better products. Imagine what kind of innovation the debt industry could see by leveraging DeFi?
5. Real-World Assets On-Chain
Everyone is waiting for RWA. Corporate bonds aren't ideal for high-growth tech startups.
They're best suited for large, stable, cash-flow-positive companies seeking to finance major projects.
Infrastructure, real estate, energy—these will bring an entirely new class of on-chain assets and risk exposures.
6. Transparency & Security
Immutability of transactions, transparent trading metrics, pricing data—greater market transparency boosts investor confidence.
7. It’s Already Happening:
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Siemens (a $100 billion market cap company) issued $64 million in digital bonds on Polygon;
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Israel testing tokenized digital bonds;
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MakerDAO holds $500 million in U.S. Treasuries and bonds (80/20 split).
This is what DeFi does, and this is what DeFi will do.
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@Ishanb22
