Smart Contract Bonds

In finance, a Tokenized bond is a type of security under which the issuer (debtor) owes the holder (the creditor) a debt, and is obliged – depending on the terms – to repay the principal (i.e. amount borrowed) of the bond at the maturity date as well as interest (called the coupon) over a specified amount of time. Interest is usually payable at fixed intervals (semiannual, annual, and less frequently at other periods).

Thus a tokenized bond is a form of loan or IOU. Tokenized Bonds provide the borrower with external funds to finance long-term investments or in the case of government bonds – to finance current expenditure.

Tokenized Bonds and stocks are both securities issued through the Bitcoin Blockchain, but the major difference between the two is that (capital) stockholders have an equity stake in a company (i.e. they are owners), whereas bondholders have a creditor stake in the company (i.e. they are lenders). Being a creditor, tokenized bondholders have priority over tokenized stockholders. This means they will be repaid in advance of token and paper stockholders but will rank behind secured creditors, in the event of bankruptcy