How SuperBonds Combines DeFi Investors to Build a Real Credit Market


Great systems have one thing in common — they keep a balance of power. A balance of power keeps systems robust and spreads the risk of failure. That is why the American democracy has lasted for over 200 years. And that is why TerraUSD lasted only a bit over one year — the risks were not spread adequately.

SuperBonds follows this principle: keep the system as simple as possible yet as complex as needed.

This article explains the balance of power in the SuperBonds ecosystem and highlights how different investor types fulfil distinct roles. In the end, it all comes together to what side of the trade you want to be.

You are buying fixed yield if…

The bond market is the biggest capital market in traditional finance, yet no direct crypto equivalent exists. The equivalent of a bond trader in traditional finance is the person (or protocol) investing in fixed yield in SuperBonds. Put simply, SuperBonds is designed around incentives for those looking for a fixed yield.

There are three main archetypes of fixed yield buyers on SuperBonds.

The mature investor

This type often comes from a tradfi background, although crypto OGs also fit here. A mature investor’s primary objective is diversification. They understand the cyclicality of crypto markets and how a downturn and consolidation phase is ahead of us.

Due to crypto’s growing correlation with equity markets, the prices of BTC and ETH have been falling. Unlike in tradfi, DeFi markets do not have a real equivalent of treasury bonds as a safe haven. Stablecoins like USDC serve as such but do not provide yield. Individual protocols provide yield opportunities but do not provide safety.

SuperBonds fills this gap by enabling mature investors to diversify without taking on risks. The SuperBonds bond yield is a representation of the aggregate yield across DeFi — the equivalent of a risk-free rate in DeFi.

The hedging yield farmer

In traditional finance, you may hold a few stocks, but as markets correct, you reduce your exposure and put some into bonds. It protects your capital (partially) from inflation but gives you the flexibility to act.

DeFi’s equivalent is a yield farmer that wants to allocate capital from farms to lower-risk investments. Sure, you can keep it in stables — but your bag is leaking value due to inflation.

Yield farmers essentially also want to diversify, but their bankroll may be different from that of a mature investor. Yield farmers also understand the benefit of staying in USDC — a key advantage over farms in undercollateralized stablecoins.

The risk-averse investor

The risk-averse investor may already have some rug victim experience. It could be an investment in a big algorithmic stablecoin *cough cough* or simply a yield farm gone wrong. Like the other types, the risk-averse investor understands that the best way to survive a bear market is not to be bear prey and preserve your capital.

This type of investor also values the flexibility and safety of USDC. They understand the necessity to stay liquid but also the importance of leveraging your idle capital.

Bonus addition: the DeFi protocol

This counts as a bonus addition since DeFi protocols will probably not jump into SuperBonds straight away. Most treasuries that were in Anchor Protocol getting “safe” 19.5% are too traumatized to reallocate their capital to a fixed yield product — that is understandable. However, over time, DeFi protocols will inevitably flock to SuperBonds since it provides the only aggregation of a risk-free rate in DeFi.

As the protocol matures, investors will bring the fixed yield down and liquidity providers will offer adequate liquidity for bigger investment sizes. That is when protocols and their treasuries will start buying into SuperBonds.

All these types have a similar motivation: capital preservation, staying flexible and liquid, but still leveraging your capital. But as important as bond traders are, the protocol needs to spread the risk to avoid a single point of failure and design a sustainable balance of power.

This role falls to the liquidity providers.

You are a liquidity provider if…

Liquidity providers want to maximize yield. SuperBonds utilizes their mercenary nature as a strength. LPs are happy to take on the risk of deploying capital across decentralized finance and they value yield-maximization over smart contract risks and rug risks. Hence, LPs underwrite the bonds that provide the fixed yield and skim off any excess returns the traders’ capital generates across the DeFi ecosystem.

Unlike in a regular yield farm, LPs on SuperBonds do not only maximize yield. They understand the mechanics of a structured product and how fixed and variable yield works. The liquidity provider is a sophisticated DeFi investor looking to balance risk and reward, who wants to contribute to building a fundamental piece of DeFi infrastructure.

You can read more about how LPs underwrite bonds in SuperBonds in our bond underwriting guide.

The TLDR — How It All Ties Together

Like it or not, the future of DeFi is to mature and become more similar to traditional finance. Either that or DeFi will always remain a token casino without real-world application, where those who come early dump on those who come late.

SuperBonds combines the motivations of different investor archetypes and incentivizes them to create a cornerstone of a more mature DeFi market:

  • Mature, risk-averse, and hedging investors: they want to diversify and/or protect their bags in a downturn
  • DeFi protocols: they want to protect their treasuries and keep building.
  • Liquidity providers: they want to ape (safely).
  • DeFi as a whole: wants to become more useful and create a better version of the financial system.

The first step to building a real alternative to the traditional financial system is having a real credit market based on a true interest rate. Get your 8% fixed yield and head to the SuperBonds app

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DeFi’s first on-chain fixed-yield market: Guaranteed Yield. Self-Custody. Built on Solana

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DeFi’s first on-chain fixed-yield market: Guaranteed Yield. Self-Custody. Built on Solana