The concept of autonomous and distributed financial services is somewhat experimental and volatile at the moment. This is why platforms like EURxb.finance are trying to bring much-needed stability and maturity to the market. And this entails the introduction of standard and yet open financial products.
EURxb.finance has conjured an innovative financial instrument, EURxb, that combines the yield generating opportunities of DeFi and the stability that comes with traditional securities. EURxb is a EUR stablecoin backed by ISIN-registered bonds. The objective is to provide a product that can cater to the institutional demand for DeFi. As such, EURxb.finance has incorporated a unique architecture for its EUR stablecoin to unlock unprecedented functionalities for institutional investors.
Why Is EURxb Different?
While there are just a handful of EUR stablecoins functioning presently, the successes and wide variety of dollar-pegged tokens showcase the pivotal roles of stable cryptocurrencies. There is always the need for digital assets that can shield investors from the uncertainties of the crypto market. That said, it is not enough to create a half-baked stablecoin with unverifiable systems, which is why EURxb.finance has opted for a DeFi-powered token with auditable infrastructures.
The project adopts the over-collateralization principle to ensure that the total value of the underlying assets locked in smart contracts is higher than that of the pegged tokens. With this, it is almost impossible for the stablecoin to lose its underlying value, regardless of unforeseen events.
Unlike existing DeFi stablecoins like DAI, the project mints EURxb by locking 100 million EUR worth of registered, regulated, and tokenized green bonds. Before this, the protocol, through non-fungible token (NFT) techniques, tokenized securities valued at 133 million EUR as collateral for minting the NFT-based bond tokens. This is in line with the over-collateralization principle highlighted earlier. And since both the security and bond tokens are non-fungible, each is unique and verifiable on the blockchain.
The EURxb is subsequently minted by locking the NFT bond tokens in a smart contract. With this, not only does EURxb maintain the valuation of the underlying bond, but it also accrues interests. Note that the issuer of the bond, Miris AS, a Norwegian sustainable real estate developer, provides an annual interest of 7% to bondholders. As a result of EURxb holders’ indirect ownership of the underlying bonds, they receive a 7% fixed interest yearly provided that the tokens remain in their wallets.
While stablecoin holders can accrue interest by locking their holdings in vaults, lending platforms, or crypto saving accounts, EURxb holders can do this by just storing their tokens in a wallet. The simplicity of this system and the assuredness that it is powered by a regulated source is one of the reasons for EURxb’s growing appeal to institutional investors. Not only can EURxb shield investors from volatility, but it also provides a fixed interest rate as opposed to the unpredictability of existing DeFi interest-generating opportunities.
Furthermore, EURxb can also function as a DeFi gateway for institutional investors. EURxb holders can purchase other DeFi tokens or use their tokens to generate extra income from other DeFi protocols.
Although EURxb.finance showcases elements of traditional finance, it has stayed true to its DeFi side by implementing community-focused governance. Users can shape future developments of EURxb when they own the protocol’s governance token, XBE. The token was distributed to users who provided liquidity to EURxb paired pools on Balancer or Uniswap. The program assigned 15,000 XBE to liquidity providers and grants them the voting right to influence the development of the platform.
Notably, EURxb.finance has not set aside a share of the total supply of XBE to the development team or founders. Therefore, the governance token distribution program looks to reward more users, with over 12,000 XBE already shared among liquidity providers. Based on this framework and the core functionalities of EURxb, it is safe to say that the project has found a balance between decentralization and traditional financial methods.