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What they’re calling “bonds” are actually callable binary futures. They either pay you 1 basis when called or they expire worthless, if Basis economy will stag

What they’re calling “bonds” are actually callable binary futures. They either pay you 1 basis when called or they expire worthless, if Basis economy will stagnate/contract for 5 years in the row. Additionally they rely on unregulated crypto “exchanges” to make secondary markets in these futures. I think the reason they’re calling them “bonds” is because binary futures and prediction markets are illegal in US (falling under CFTC jurisdiction). Similar problem will apply if they were real bonds - then they're falling under the jurisdiction of the SEC and will have to be registered with them or get an exemption from registration. EDIT: For those who think that MakerDAO is better than Basis protocol, it's not that Maker got CFTC license to operate a Swap Execution Facility (SEF)[1]. 1. https://en.wikipedia.org/wiki/Swap_Execution_Facility https://en.wikipedia.org/wiki/Swap_Execution_Facility

m3kw9 8y ago
People are struggling to understand even Bitcoins.
- barrow-rider 8y ago
  Not sure why this is getting downvoted. Parent is right, most folks don't get it, even technical ones. Most people aren't in STEM, aren't making north of six-figures doing tech, and aren't super literate when it comes to even basic technology, like their car or IR TV remote. This Christmas, buy everyone in your family and all of your friends $100 worth of BTC. I'd bet my hat that you'd have to explain how it works, in a practical-how-to-trade-this sense, to virtually all of them, save for those in STEM. And even if they learned how it works, what's your aunt going to spent the BTC on? Can't take it to Applebee's, or Wal-Mart, or Bed Bath & Beyond, or pay a mortgage or a parking fine.
  - jandrese 8y ago
    By the time you explained it to them they would only have $50 worth of Bitcoin.
    - keymone 8y ago
      Or $200.
homakov 8y ago
They are calling it bonds because they are literally bonds https://en.wikipedia.org/wiki/United_States_Treasury_security#Treasury_bond https://en.wikipedia.org/wiki/United_States_Treasury_securit...
- nivertech 8y ago
  Nothing in this Wikipedia article talks about government defaulting on bonds (or they expiring worthless) if the economy enters into 5 year long recession. Default should be an unusual or unexpected outcome, not part of the contract. You don't take a loan from somebody and then saying them: "you know what, if I will not return you money in 5 years, even if my company still operating - write it off." If the expiration is part of the contract, then it's a derivative contract. In this case you have only 2 outcomes: either you get paid 1 basiscoin, or your "bond" expires worthless after 5 years and you get nothing. That's why it's a binary future. Binary futures/options and prediction markets are illegal in US since they resemble gambling.
  - blackstrips 8y ago
    > If the expiration is part of the contract, then it's a derivative contract. In this case you have only 2 outcomes: either you get paid 1 basiscoin, or your "bond" expires worthless after 5 years and you get nothing. That's why it's a binary future. Binary futures/options and prediction markets are illegal in US since they resemble gambling. Sounds like credit default swaps ... you pay a premium until expiration (you get nothing) or some credit event happens (e.g. default; you get a payout). Difference seems to be the conditions for a payout.
    - nivertech 8y ago
      yes, but the problem is that there is no credit event happens, it just the way they structured the contract, b/c otherwise their simulation shown the price stability will not work. There is no credit event, because they can always print new basiscoins, they just just arbitrary choose not to (probably overfitted for 5 years expiration). Even if basis "bonds" were credit default swaps, and then listed on crypto "exchanges", they're still falling under the regulation of CFTC. Those exchanges need to be licensed as Swap Execution Facilities (SEFs). And if basis doing on the protocol level like MakerDAO - they need to get SEF license by themselves.

m3kw9 8y ago

People are struggling to understand even Bitcoins.

barrow-rider 8y ago
Not sure why this is getting downvoted. Parent is right, most folks don't get it, even technical ones. Most people aren't in STEM, aren't making north of six-figures doing tech, and aren't super literate when it comes to even basic technology, like their car or IR TV remote. This Christmas, buy everyone in your family and all of your friends $100 worth of BTC. I'd bet my hat that you'd have to explain how it works, in a practical-how-to-trade-this sense, to virtually all of them, save for those in STEM. And even if they learned how it works, what's your aunt going to spent the BTC on? Can't take it to Applebee's, or Wal-Mart, or Bed Bath & Beyond, or pay a mortgage or a parking fine.
- jandrese 8y ago
  By the time you explained it to them they would only have $50 worth of Bitcoin.
  - keymone 8y ago
    Or $200.

homakov 8y ago

They are calling it bonds because they are literally bonds https://en.wikipedia.org/wiki/United_States_Treasury_security#Treasury_bond https://en.wikipedia.org/wiki/United_States_Treasury_securit...

nivertech 8y ago
Nothing in this Wikipedia article talks about government defaulting on bonds (or they expiring worthless) if the economy enters into 5 year long recession. Default should be an unusual or unexpected outcome, not part of the contract. You don't take a loan from somebody and then saying them: "you know what, if I will not return you money in 5 years, even if my company still operating - write it off." If the expiration is part of the contract, then it's a derivative contract. In this case you have only 2 outcomes: either you get paid 1 basiscoin, or your "bond" expires worthless after 5 years and you get nothing. That's why it's a binary future. Binary futures/options and prediction markets are illegal in US since they resemble gambling.
- blackstrips 8y ago
  > If the expiration is part of the contract, then it's a derivative contract. In this case you have only 2 outcomes: either you get paid 1 basiscoin, or your "bond" expires worthless after 5 years and you get nothing. That's why it's a binary future. Binary futures/options and prediction markets are illegal in US since they resemble gambling. Sounds like credit default swaps ... you pay a premium until expiration (you get nothing) or some credit event happens (e.g. default; you get a payout). Difference seems to be the conditions for a payout.
  - nivertech 8y ago
    yes, but the problem is that there is no credit event happens, it just the way they structured the contract, b/c otherwise their simulation shown the price stability will not work. There is no credit event, because they can always print new basiscoins, they just just arbitrary choose not to (probably overfitted for 5 years expiration). Even if basis "bonds" were credit default swaps, and then listed on crypto "exchanges", they're still falling under the regulation of CFTC. Those exchanges need to be licensed as Swap Execution Facilities (SEFs). And if basis doing on the protocol level like MakerDAO - they need to get SEF license by themselves.