Original topic:Everything you wanted to know about ES Volcano Bond and were afraid to ask!t Author: fillippone
For inside the last event of "Bitcoin Week", "Feel the Bit", wey happen for El Salvador last November 20th, their presido Nayib Bukele con yarn dem d matter about one project, for d first El Salvador Bitcoin bond, way dem dey call ESBB1.
d project self get as e take dey, e con get financial, technological, and practical wahala. we go put mouth for all d matter, but I go try talk well well for the economic and technical part of am. I go only leave the many talk talk about Bitcoin city citizenship project matter for other thread Dem.
1. D obonge plan
El Salvador, d only country wey dem dey fit use Bitcoin like normal money, don tell people say dem wan borrow money through debt, make dem for fit raise capital to tay make Bitcoin matter for d country fast reach everybody. one blogger, wey Dem dey call Blockstream don post say dem go use half of the money wey dem borrow, tay build the new city, and dem go con call am "Bitcoin City". dis wan go dey for inside the Gulf of Fonseca wey dey near one active volcano. dem no go only use d energy wey dis volcano dey make tay power d city, but dem go also use am tay dey mine Bitcoin. d city no go put any traditional tax like d income tax, property tax, capital gain tax or even labor tax for e people dem. Instead, dem go only get 10% sales tax wey dem dey put when person buy something and na dis wan dem go take dey fund the country matter.
since dem wan use only half of d money tay build dis "Bitcoin city", dem go use d remaining part of d money (bond) wey dem borrow tay pay watin dem dey call "Bitcoin dividend" give d bondholders dem. dis wan go con make the final bond yield go up well well. d plan be say dem go use d capital tay buy Bitcoin, hodl for five years. den, dem go con return part of the interest give d investors dem for inside d 5 years, wey dem take borrow d money. dem go pay am like year to year coupon and con use money wey dem get from the sell of dose bitcoins take run am.
Again, d investor wey buy plenty USD wey pass 100,000 of the bond go fit con apply to become citizen of their country, "El Salvador". dis bond matter go dey tokenised well well as digital form wey Blockstream don develop.dis wan go come make pipo fit trade dem bond without need of any central authority (decentralization), dem go use watin dem call Liquid sidechain. dem go fit buy d bond for form like USD, BTC, USDT, and dem go fit give d original digital feature. d Small wan wey dem go fit buy na 100 USD only and dis wan go "help give many people access to d bond."
if you wan talk put for d matter of El Salvador and how Dem take build the Bitcoin city, I go say make you read am from here:
First city, wey dem build with bitcoin.
2. d full bond Tori
like dis now, na only small Tori don dey ground. d only matter now be d ones wey show for conference dem and some interview with Bitcoin people dem like Samson Mow, because d presido him self no show for d press conference wey e for fit chuck mouth put more for d matter.
dem make d termsheet of d bond as presentation slide and you fit read am so:
d way d term sheet take talk am be say
- Dem go issue d bond for inside January 2022. and na the US dollar(USD wey be legal tender for El Salvador), na e go dominate an,with size wey fit reach 1 billion
- d bond fit grow come enter 10 years, or January 2032 and go continue to pay year to year coupon of about 6.5%.
- After d first five years don pass, d bond go come dey sell equal amount of Bitcoin every quarter
- another thing be say dem don share d sales put for many quater so dem go fit still face market matter.
- After dem don fit convert d original Bitcoin purchase, d bond go come dey pay extra coupon wey go be 50% of d gain wen dem go get if dem sell 20% of d Bitcoin wey d bond get. dem go con share d profit with no cheating with d investors, if d sale go make profit.
- make we remember say na only 50% of d money na e d bond go use Tay buy Bitcoin. so d "Bitcoin dividend" go pay 50% of d gain of d 50% wey dem invest, give d investor.
for dis example, you go fit see all d cash flow wey dey d bond according to d Bitcoin price for inside d second row:
spreadsheet Blockstream, wey be one Canadian Blockchain solution company dem, don help El Salvador put dis bond well, and e come dey work back to back with dem for d past few months. d government dem go also pass small small laws for Bitfinex make Dem dey sell d bonds.
El Salvador dem, still dey wan create government securities law so dem go fit give Bitfinex security licenses make Dem fit process d bond issuance. dis matter fit open road for many other liquid security tokens dem like d Blockstream mining note(BMN) or Exordium (EXO) token to add join list of regulated El Salvadorian securities exchange.
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dis wan go fit take time, as e go provide d issuer and person wey dey run d matter and all d legal frame matter, wey be correct obonge task. upon say all dis many many matter, dis one na still d first time wey dem dey run am and so many things dey to think.
d way me take dey reason am sha be say, d bond na e go be d first digital bond for d whole world. dem go trade am for Blockstream AMP, wey be one platform wey dem dey use tay run trade, and handle matter concerning digital assets wey dem put for liquid network.d whole trading matter go dey digital and go fit run 24/7(weekends and bank holidays come join) e go con pass one Blockchain (albeit one permissioned one) and go dey fully digital. no be only d bond part go dey digital o, even d purchase part self go still dey digital as dem fit use fiat, BTC or even stable coins. dis wan go help reduce d price for both d person wey issue am and d investors.
dem go dey use Bitfinex interface take do d real trading as e go for run onboarding, match engine and carry order process of d orders and trade matter.
for dis
spreadsheet, you go fit see copy of d term sheet.
3. El Salvador as issuer for inside traditional finance matter
El Salvador get very poor money matter. dem rate d country as a CCC+. Asin, Dem rate their financial matter as "dirty". dis one no come allow d country fit put hand for other traditional markets as e be say many market people dem, no go fit buy bonds wey dirty and dem wey fit, go need big money to take run am.
El Salvador get small better bonds Sha:
as una dey see am so, na only 12 bonds na e don dey mature from 2023 up to 2052. make we remember say US get many other hundred bonds too to take construct d same bond curve.
the yield curve na e dey here so:
El Salvador yield curve: e dey inverted; shorter maturities go need better yield.d graph here, dey plot d maturity date of all d El Salvador bond, come dey match all of dem with d yield wey e concern. dem dey call d resulting line d "Yield Curve" and plot d line wey we go come use exchange capital join time. normally Dem dey title d slopes carry face up. anything wey d issuer, if I come give you d money, I go wan collect better return because I allow person use am for that kind long time wey be credit risk. the credit risk, wey concern d matter, wen d Person wey borrow money no come return am, d whole thing go come dey increase as time de go.
shorter maturities go need higher yield, dis one dey common among issuers wey dey fear. Normally, d whole idea be say, if you fit pass through all d small small stress, later things go better and small premium na you go even need. na dis wan dey produce one inverse yield curves, wey you no dey see for inside issuers wey go fit get more credit.
since Dem introduce d matter of Bitcoin law and e paddy dem with d IMF, El Salvador bonds don dey loss many premium on a stead and dis wan come make the yield dey go north (remember say if price of bond fall, e mean. say the yield grow an inverse relation).
El Salvador Sovereign Yield Curve wen dem get for now. El Salvador 10year yield for d last few months don increase from 12.50% reach 16.00%
and d one wen dem get three months ago don see big change.
D current curve suppose dey similar to the one wey dey for Google Sheet ESSBB1 go dey somehow depressed because of d yield we dey related to d bonds for inside d curve. make we just remember say small small Bitcoin like dis go still join. If Bitcoin blow well well, the final chop chop go better
4.how dis bond take dey related to traditional investment.
since dem start d conference, as Dem see say e go help fasten Bitcoin adoption for El Salvador. yes na Bitcoin city na e mean but d bond still get e own matter financially.
So make I cut d long story short; d bond na financial wahala.
one correct analysis wey one
Bloomberg article carry. normally, if you buy bond from El Salvador con use d remaining money take buy Bitcoin, e go produce better high result. and dis one na true any how e wan be. even if dem no fit guess say Bitcoin go reach zero,
the payoff go dey better well well for the local finance bond. for dis kind places, where Bitcoin go fit reach zero, e go come make us dey wonder y we go come need to buy volcano bond , first of all.
I don do Small small calculation for d spread sheet. even after say d very bullish matter wey Samson Mow show us, d volcano bond still no dey high like d plan to buy traditional bond and come still invest the small small money wey remain for bitcoin.
so to talk am small, watin dem write for d article, instead of you to go dey buy normal Bitcoin bond, one correct method na to buy one normal bond. for example, the El SAVL 2032 wey get year to year 8.5% coupon, trading at 65 cents. dis one go mean say cash go flow for 65,000 USD. and e go come leave d possibility way person go fit invest d remaining 35,000for Bitcoin.d combined investment self go still dey high pass d Bitcoin bond for any state around d world.
so watin go make person wan go buy volcano bond, if we just show say e still be one inferior choice?
well, d reason na still d same. no be every investor get access to physical Bitcoins.
dis na y market dey for moto like GBTC, future based ETF, or even Microstrategy, or any small Bitcoin related companies wey investors dey buy, as dem wan get Bitcoin exposure wella. many money manager know watin dem go fit buy as investment and many of dem go just buy physical Bitcoins or if Dem go fit just buy d thing. den dem go just con get compliance, custodial, fiscal or accounting wahala. so yes, na dis reason, small small investment moto dey exist.
d major problem with dis kind bond be say e too hard for investment managers wey no fit buy Bitcoin to come buy junk bond wey dem no even dey trade for traditional financial market. plenty managers get one level wey dem set to know if d debt issuers dey creditworthy or not, and no be lie, El Salvador rating dey way below dis level, e dey stay for CCC+. also, another problem na e be d nature of d digital bond, as e no get any centralized place wey Dem dey trade, plenty people go get wahala with am.
5. how dis bond tay dey bring new idea con d financial system
dis wan na correct matter wey concern d bond. as na e be d number one digital bonds for d world wey dem don create. dem don try many other test, but na dis be d first time wey big body Dem don give digital bond, wey person go fit trade with digital assets like BTC and USDT. Blockstream wey be one Canadian firm wey dem never list, na e fes issue bond wey resemble am but e be like their own scale con dey different.
Stephan Livera podcast, con get on correct matter about am:
Stephan Livera:
dis wan correct well well, you go need think am. so if dem wan run d matter e go be say na trading Dem go do pass. you go need to become customer for Bitfinex before you go fit get dis bond? or you go just buy am?
Samson Mow:
correct, Bitfinex go con be d exchange wey fes release d bond. Dem go con get license wey go fit allow dem dey give dat security. so, e be like say any person wey wan get d first bond go need to buy from Bitfinex direct but once you don get am— make we first go back small— Dem dey give out dis bonds as token for d liquid network, dem con still get permissions. dem dey do am with blockstream AMP, wey be our platform wey go fit manage asset.Na like two of two multisig e just be. you go just need to go Bitfinex, come do your KYC.dem go con add you join their AMP list wey dem don allow. if me and you dey dat list, we go fit withdraw am go any wallet wey dey support liquid for AMP assets. like dis, we fit OTC trade am for each other, just like how we dey do with Blockchain Mining Note.
Dem don already get one telegram channel and people dom dey trade d BMN OTC well well. d only tin come be say no market place. exchange market wey high no just dey, but Dem go fit dey trade with out fear. dis one go con be another matter for bond holder.and you go fit trade am, buy or even sell am for another person wey get dis bond.
for here, na fully digital decentralized OTC trading community na we get. dis wan na e be d future of traditional markets. but me sure say some institutional players, don already dey ready for am. dis wan Na true talk, no be only from technological side e be, as to put am in place na small thing but most importantly from the angle of compliance and regulation.
make you still remember say even if dis bond trading fit decentralized, Dem no dey decentralized at all. but central registrar dey before.
Again for the SLP:
Stephan Livera:
you go fit withdraw dis bond token go your blockstream jade and put am there. like dis now, I just dey wan really know how e go tay work if for example say you con loss d seed word for you blockstream jade— how dat part go tay work?Abi e get central registrar ? abi Na watin AMP dey provide for here?
Samson Mow:
yes, well well. AMP go fit allow d service block those tokens because Dem don loss. and because e no dey decentralized, abi? make we no go dey lie say d bonds dey decentralized. because dem no dey decentralized at all. dem be security and dat na y you get KYC and dem go need to add you join d their white list so you go fit trade and withdraw from d exchange. so watin go sub now be say d service go block d old tokens come give you d new ones. so d total supply wey dem go carry give out no go change becos some of d tokens no dey move round again but e still get how we go fit Tay get dem back. And we don get am with EXO for Infinite Fleet. Person sef fit lose their keys, true true. so dem go need to collect new tokens from STOCKR. So, if you loss your key, you fit still get chance tay recover am—e no be Bitcoin. Na bond wey Dem tokenised with Bitcoin for inside.
dis wan dey very important.
d wahala be say plenti of dis financial people dem no dey Sabi differentiate between centralized control of assets and d centralization of exchange as Dem dey talk about "Blockchain" and " decentralized assets" everyday.
to add join d whole matter, another important matter na d technology behind am. all of your better digital asset, NFT tokens or anything wey you dey interested in dey rely on one kind yeye Blockchain namely ETH. no be dis wan. d technology for here dey 100% Bitcoin as liquid e sef na Bitcoin sidechain. na traditional, slow, polluting" Bitcoin technology na e dem take dey run am.also, na one better.dis one na big sell point for dis bond and e go definitely be one real test case for Liquid to become d backbone of d new financial market.
6.extra Tori Dem
Fillippone " everything you go wan know about dis threads.
