BarnBridge (BOND) is a defi protocol designed to tokenize risk. The plan at the BarnBridge DAO is to reduce decentralized finance (DeFi) risks by redistributing risks through tokenization.
To that end, BarnBridge creates Structured Market Adjusted Tranches (SMART) Bonds. A tranche is a slice or portion of a security that is sold to investors or speculators. BarnBridge creates and tokenizes risk tranches it sells.
Risks BarnBridge tranches include interest-rate sensitivity and market price volatility. Users determine the level of risk they want by selecting a risk profile. They build BarnBridge products to address specific DeFi risks.
Current BarnBridge tranches include SMART Yield and SMART Alpha.
BarnBridge Structured Market Adjusted Tranches
SMART Yield offers fixed or levered variable yield on stablecoins. SMART Yield provides this yield by integrating with the Aave (AAVE) and Compound (COMP) liquidity protocols.
Ultimately, SMART Yield aggregates user deposits into underlying markets on the AAVE and Compound platforms. This also allows SMART Yield to provide both low volatility and high-risk tranches.
SMART Yield powers two kinds of pools. Junior Pools offer higher risk products with variable rates rewards. Senior Pools offer lower risks with fixed rate rewards.
Smart Yield Senior bonds
The SMART Yield Senior bonds or sBonds are ERC-721 (Ethereum Request for Comment) non-fungible tokens (NFTS). BarnBridge mints an sBond each time a user deposits money into a pool. After the sBond matures, BarnBridge burns the NFT.
Each pool can contain unlimited numbers of senior and junior positions. To calculate pool profits and losses efficiently. BarnBridge calculates the weighted average across all existing senior bonds. They call the weighted average is the ABOND. BarnBridge recalculates ABOND parameters each time they mint a new senior bond.
Senior APY is the annual percentage yield for the next marginal senior bond BarnBridge mints. The Senior APY fluctuates in accordance with the rolling average of the underlying interest rate market. When a user makes deposits to the Senior pool, the Senior APY is the maximum fixed yield locked in.
Smart Yield Junior Tokens
ERC-20 (Ethereum request for comment) fungible tokens represent SMART Yield Junior pool positions. BarnBridge mints a junior token or jToken each time a user purchases them through the BarnBrdge App.
The jTokens represent ERC-20 tokens such as USD Coin (USDC) held in the Compound and AAVE pools. For example, each user receives a jToken when he deposits a USD Coin in a Compound pool. They base the yield of jTokens on the prices of Coins. For example, the USDC Coin Price determines the yield from a USD Coin Jtoken.
Users can withdraw Junior pool liquidity in two ways. The first way is junior bonds. A junior bond is an ERC0721 non-fungible token that represents a user’s exit from the pool.
The ABOND maturity determines the date at which they can redeem the bond. They base the yield from senior and junior bonds on the APY of Compound or AAVE pools. Users can buy or redeem the bonds through the BarnBridge App.
SMART Alpha
The SMART Alpha is a market price exposure risk mitigation tool that uses tranched volatility derivatives. SMART Alpha calibrates a user’s exposure to an underlying asset.
The SMART Alpha redistributes the performance of an aggregated pool of the junior and senior underlying assets. Theoretically, SMART Alpha reduces the sBond holders’ risk to the pool’s jBond holders.
Essentially, SMART Alpha allows junior depositors to buy the asset risk price from senior depositors. The ultimate of SMART Alpha is a two-sided marketplace for ERC-20 tokens. Depositors on both sides of a pool receive an ERC-20 token as proof of liquidity.
Users can only enter or exit SMART Alpha pools once a week at 9:30 A.M. at US Eastern Standard Time. To explain, Eastern Standard Time is the time in New York City, where America’s financial markets are based.
Each SMART Alpha pool has a senior rate and a junior rate. They base the Senior Rate on the underlying asset’s downside price movement the week before dollar-denominated losses. SMART Alpha bases junior dominance on the junior depositors’ share of a pool’s ERC-20 tokens.
SMART Alpha smart contracts deploy on blockchains. The BarnBridge DAO (decentralized autonomous organization) sets the parameters that guide SMART Alpha.
SMART Alpha parameters include the status of the Guardian Contract, Contract ownership, the fee structure, the underlying asset price oracle, an accounting model, and a senior rate model.
SMART Exposure
Another BarnBridge feature is SMART Exposure. SMART Exposure passively rebalances two assets via tokenized strategies. The SMART Exposure is an automatic portfolio concentration management tool.
A SMART Exposure maintains a passively managed allocation on an underlying ERC-20 token pair. SMART Exposure allows to use risk adjusted strategies. They claim SMART Exposure regularly conducts automatic rebalances and tracks asset price changes, which ensures close tracking of target ratios.
SMART Exposure tokens are fungible ERC-20 tokens that easily integrate with other protocols and services. Those protocols and services can use the Smart Exposure tokens as collateral for transactions.
Users can tokenize strategies for quick deposits, exchanges, and redemption processes. One hope of SMART Exposure is to lower Ethereum gas costs. They power SMART Exposure with Chainlink price feed Oracles and BarnBridge liquidity pools.
SMART Exposure makes it easy to track popular asset ratios, for example, Ethereum/Bitcoin, automate treasury management, and hedge asset price volatility.
What Value does BarnBridge Offer?
Mr. Market has a strong interest in BarnBridge and Structured Market Adjusted Tranches. For example, BarnBridge (BOND) was CoinMarketCap’s fifth-most trending cryptocurrency on 17 July 2022.
CoinMarketCap gave BarnBridge a Market Capitalization of $55.760 million, a Fully Diluted Market Cap of $79.053 million, a Total Value Locked (TVL) of $3.190 million, and a 24-Hour Market Volume of $63.966 million. They base those numbers on a Circulating Supply of 7.053 million BOND, a Maximum Supply of 10 million BOND and a Total Supply of 10 million BOND. BarnBridge was CoinmarketCap’s 367th largest cryptocurrency wit ha Coin Price of $7.90 on 19 July 2022.
In contrast, CoinBase gave BarnBridge a Coin Price of $7.91, a Market Capitalization of $55.9 million, and a 24-Hour Market Volume of $64 million on 19 July 2022. They based those numbers on a Circulating Supply of 7.1 million BOND. Ironically, I consider BarnBridge a volatile token because CoinBase gives it an all-time high of $185.93.
I think BarnBridge (BOND) is an interesting cryptocurrency and protocol that could make money because people are worried about market risk and volatility. In particular, traders frightened of rising inflation will take a strong interest in BOND and SMART Bonds. These fears are justified, the US inflation rate rose to 9.1% in July 2022.
If you want a token, that can make money from growing risks. BarnBridge is worth examining.
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