Erin Dana presented on Wednesday, December 29, through her Twitter account, Sailor, the next product on the roadmap for Barn Bridge.
“With 2022 right around the corner, we are launching a detailed roadmap of what’s on the horizon for BarnBridge. This is a three-part series on work-in-progress and time-to-market timelines. After doing extensive market research by speaking to funds and iterating on the concept, we are pleased to announce a new product addition to BarnBridge: Sailor! ”He said through an article posted on the Medium platform.
Here are the key takeaways:
- Seniors deposit stablecoins like USDC.
- Young people deposit wBTC.
- Seniors stablecoins are used to buy wBTC.
- At maturity, sell enough wBTC to pay seniors their principal plus interest owed.
- All the remaining wBTC is given to the Juniors
According to the company, the inspiration for this camera was oversubscribed – around $ 500M, in June 2021. This was for 6.125% per year senior notes – due 2028. Net proceeds from the sale of the notes were specifically mentioned that it will be used to acquire bitcoins.
“In our case, we want to create a product that opens the possibility for everyone to get involved in this type of trade, and not only for accredited investors, and those who have the luxury of issuing these coupons as senior obligations of their company.
This product will be an open market where the Michael Saylors of the world will be able to meet the buyers of senior fixed notes of the world”, he added.
The company explained that the current market for fixed income bonds is broken. Interest rates remain artificially low and quantitative easing is setting the floor for bond prices, translating into caps on yields.
What is Sailor?
Sailor divides the risk into two tranches:
Seniors: Deposit a stable currency like USDC and get a fixed interest rate paid in the same stable currency.
Juniors: Deposit wBTC and get all excess earnings in wBTC.
According to the company, seniors are selling risks to juniors and are given a much higher interest rate on stablecoins compared to current lending protocols.
Furthermore, he indicated that juniors are buying risk from seniors and are essentially leveraging their position in Bitcoin.
An alternative way of looking at this is that Juniors are borrowing money from Seniors and paying them interest to leverage BTC.
How does Sailor work?
Sailor’s operating mechanics are quite elegant:
Step 1) Define the boat
The pot / pool is defined by an expiration date and the interest rate that seniors will receive.
Step 2) Load the boat
Once the pool is defined, the loading begins. Young people deposit wBTC. Seniors deposit a stablecoin like USDC.
Step 3) Set sail
Stablecoins deposited by seniors are used to buy wBTC from an MMA like Uniswap. During the journey to maturity, the pool completely contains wBTC.
Step 4) Arrive at the destination and unload the ship.
At maturity, enough wBTC is sold to pay seniors their principal plus interest owed. All the remaining wBTC is given to the Juniors.