Have you ever wondered how to make money by lending money to governments? Believe it or not, this concept has been around for over five centuries, and it’s called bonds. Bonds are essentially loans supported by governments, providing a secure way for nations to fund their projects.
A Brief History of Bonds
The Italians first invented bonds to fund their infrastructure projects in 1100. The English took this innovation and used it to grow their economy. Today, nearly every country in the world issues treasury bonds as a method of raising capital. But what makes treasury bonds stand out? Simple: they’re backed by governments.
You might not know this, but a government bond once saved France’s economy after Napoleon’s defeat. Back in 1817, the French minister Talleyrand, working alongside the Duke of Wellington, crafted a deal to soften the harsh financial reparations demanded by Prussia. To rebuild its infrastructure and revive its industrial and agricultural sectors, France issued a bond—a financial lifeline for the nation.
This bond was a groundbreaking move. It was purchased by the prestigious British bank Barings, and it offered an attractive 8.6% annual interest rate. The funds raised helped stabilize France’s economy, fostering recovery and progress in a nation scarred by war. The 1817 bond stands as a powerful example of how bonds have not only driven economic development but also supported peace efforts throughout history.
This story of resilience and diplomacy is just one chapter in the long history of government bonds—a financial tool that continues to shape economies and societies worldwide.
While no investment is 100% risk-free (think Germany in the 1920s, Zimbabwe in 2008, or Venezuela in the 2010), treasury bonds are widely considered the safest investment available. They’re so reliable that pension systems worldwide pour their money into them. Even the investment legend Warren Buffett vouches for their stability.
The growth of stablecoins
The story of stablecoins is like a wild ride through the world of crypto. It all started back in 2014 when the first stablecoins, BitUSD and NuBits, showed up on the scene. BitUSD was the very first, created by some big names in the biz and using the BitShares blockchain. NuBits came next, but it didn’t last long ‘because it didn’t have enough dough to back it up.
Then, in 2014, Tether (USDT) burst onto the scene and totally changed the game. It was the first stablecoin backed by actual money, and it was huge. It used to be called Realcoin, and it managed to always be worth 1 USD by keeping a stash of real money in reserve.
After that, things got even more interesting with the next generation of stablecoins. In 2017, MakerDAO launched Dai, which was the first one that didn’t need actual money in the bank to stay stable. Instead, it used other cryptocurrencies as collateral. Then, in 2018, Circle and Coinbase got in on the action with USD Coin (USDC), which was kinda like USDT but with more rules and checks to make sure everything was on the up and up.
These days, the stablecoin market is a big deal. USDT and USDC are the big shots, making up over 90% of all the stablecoins out there. But, there have been some hiccups, like the TerraUSD disaster in 2022, which showed that some stablecoins aren’t as stable as they claim to be.
There are three main types of stablecoins now: fiat-backed (like USDT and USDC), crypto-backed (like Dai), and algorithmic, which use fancy computer code to try and stay stable. It’s a crazy world, but stablecoins have definitely made their mark on the crypto scene.
The power of tokenization
Tokenization is revolutionizing how we think about assets. By leveraging the same blockchain technology that turned stablecoins into a global phenomenon, it’s now possible to transform physical, financial, and real assets into digital tokens. The concept is simple: just as stablecoins represent fiat currencies like the dollar—where each token is backed by a dollar held in reserve—tokenization applies the same principle to other assets. Each token represents ownership of a specific asset, whether it’s real estate, commodities, or financial instruments.
Studies predict that tokenization will grow into a $15 trillion market by 2030. Major players like BlackRock are already tokenizing investment funds, and innovative companies like Ondo have started tokenizing government-backed bonds, enabling thousands of participants to invest. However, this progress has yet to democratize access. High barriers, such as the need to be an accredited investor and significant capital requirements, leave much of the world’s population excluded. This gap creates a unique opportunity—a chance to introduce Stablebond, a new financial instrument powered by blockchain, designed to bring government bonds to everyone, anywhere, with ease and accessibility.
Introducing Stablebond: Democratizing Access to Government Bonds
Stablebond are blockchain-based tokens that represent ownership of government issued bonds, created by the Mexican company EtherFuse. These tokens simplify access to government-backed securities, offering a seamless and affordable way for users to invest. The process begins with the user setting up a blockchain-based wallet. Currently, EtherFuse supports the Solana blockchain, so compatible wallets like Fantom and SolFlare are required.
Once the wallet is ready, users deposit USDC stablecoin—with the option to start with as little as $1, breaking down traditional barriers to entry. Next, the user completes a Know Your Customer (KYC) process to comply with Anti-Money Laundering (AML) laws. After passing verification, the wallet is connected to the EtherFuse platform, authenticated, and agreements are signed. Only then can the user purchase Stablebond.
From there, the process is straightforward. Users select a stablebond from a variety of options, including bonds from Mexico, the US, and the UK, decide the investment amount, and confirm the transaction through their Solana wallet. The result is ownership of tokens representing government bonds, made possible through Fractionalized Ownership. This innovative approach marks the first phase of a financial revolution, opening up government bonds to a broader audience through blockchain technology.
How Stablebond Are Backed and Tokenized
Once the user acquires the stablebond token, they gain access to a token that represents ownership of a government bond. Behind the scenes, EtherFuse, in collaboration with authorized brokerage houses in Mexico regulated by the National Banking and Securities Commission (CNBV), handles the process of bond acquisition and custody. These brokerage houses purchase the government bond, register it, and securely manage its custody.
EtherFuse then becomes the official owner of the government bond and initiates its tokenization. With a one-to-one reserve of the bond, EtherFuse divides it into fractional units, each represented by a token. These tokens—called Stablebond—are what the user holds in their wallet. Each stablebond token corresponds directly to a specific government bond, backed by the financial assets held by EtherFuse via the brokerage houses. This system ensures transparency, security, and accessibility, bringing the benefits of fractional ownership of government bonds to a global audience.
Stablebond: Bridging Traditional Finance and DeFi
Let’s break it down with an example. Which I did, I deposited 10 USDC into my Phantom wallet and purchased four different types of Stablebond offered by EtherFuse. Once I have completed the purchase, the tokens representing these bonds are immediately available in my wallet. From there, I am free to send these tokens to anyone, anywhere, with just a few clicks.
You can see the whole process in the video I made here
What makes this even more exciting is the future potential of these tokens. As they are fully tokenized assets on the Solana blockchain, they could eventually be integrated into Decentralized Finance (DeFi) platforms, enabling new financial activities like lending, staking, or collateralization. With Stablebond, EtherFuse is creating a necessary bridge between traditional government bonds and the dynamic world of DeFi, unlocking new possibilities for both institutional and individual investors.
The Backend Powering Stablebond
At its core, the EtherFuse platform operates through smart contracts, which automate and manage the lifecycle of Stablebond. Initially developed on the Solana blockchain, the platform is now expanding its capabilities to include the Stellar blockchain, preparing for a broader rollout of its services. These smart contracts play a crucial role in tracking interest payments, facilitated through the EtherFuse Bond Token (EBT). This token not only represents ownership of the bond but also tracks accrued interest, simplifying the management and distribution of returns for Stablebond.
What sets EtherFuse apart is its use of blockchain technology to ensure transparency and trust. Every process—from minting to transferring tokens—is recorded on a public blockchain, allowing users to verify the entire lifecycle of their investments. This backend infrastructure not only ensures security and accuracy but also creates a seamless bridge between traditional finance and blockchain-powered solutions.
Global Accessibility with a Few Exceptions
The EtherFuse platform offers near-global accessibility, allowing users from Latin America, Europe, and many other regions to participate in Stablebond. However, there is one notable exception: citizens of the United States. Due to the complexities of regulatory compliance in the US, EtherFuse has decided to exclude American users for now, focusing instead on markets with more straightforward compliance frameworks.
For users in eligible countries, the platform’s accessibility is a game-changer. With the ability to start investing with any amount of USDC, even as little as $1, EtherFuse is democratizing access to government bonds. This approach reflects a forward-thinking strategy for tokenized asset projects, offering a model that bridges financial inclusivity and blockchain innovation.
Flexible Maturity and Control with Stablebond
One of the most innovative features of EtherFuse’s Stablebond is their short maturity period of just 7 days. This flexibility is a game-changer for investors, as it provides an easy way to access liquidity. If you need to exit your investment before the maturity date, EtherFuse offers a “divest” option, allowing you to sell up to 100% of your stablebond holdings.
The divest feature gives users two choices: wait until the 7-day maturity to redeem the full value without fees or pay a small premium to divest immediately. Regardless of the option chosen, investors receive their funds in USDC, ensuring both transparency and security. Unlike traditional government bond systems, which can tie up funds for months or even years, EtherFuse puts you in complete control of your money, making Stablebond a highly adaptable and user-friendly financial instrument.
Transparent Proof of Reserves for Stablebond
One of the key features of EtherFuse’s stablebond platform is the Proof of Reserves system, which ensures complete transparency for investors. By visiting the legal section of the platform, you can access detailed documents verifying the exact value of the financial assets backing each government bond. For instance, a document from November 13, 2024, issued by Legal Paradox, confirms the exact reserves held in relation to the tokens. This proof demonstrates the real monetary reserves that support the Stablebond, providing full clarity on the bond’s underlying value.
EtherFuse partners with trusted entities to acquire and hold government funds, including BBVA, one of the world’s largest banks, Actinver, a financial group in Mexico, and a regulated stock exchange in Mexico. These regulated institutions ensure that the Stablebond are backed by tangible assets. Investors can verify the reserves, including the circulated value and the ratio between the bond’s reserve and circulating value. If the ratio is above 100%, it provides additional confidence in the stability and security of the investment. With these verifiable, regulated entities behind the system, EtherFuse’s Stablebond offers a high level of trust and reliability for investors.
Exploring Diverse Investment Options with EtherFuse
For the purpose of my research, I decided to test the StableBond platform by purchasing four different types of government bonds, all with just 10 USDC—a testament to the accessibility of this system. The bonds available included a mix of stable, high-quality government-backed assets, each offering different benefits.
First, I invested in the CETES bond, a Mexican government bond with an impressive 9% APY. This is particularly interesting because Mexico is one of the strongest and most stable economies in Latin America. However, there is an important consideration: CETES is denominated in Mexican pesos, which means its valuation can fluctuate due to changes in the exchange rate between the Mexican peso and the US dollar, the stablecoin used on the platform. Nevertheless, the CETES, or Certificate of the Treasury of the Federation, automatically adjusts its APY on a weekly basis, making it an attractive option for diversifying within Latin American assets. CETES Stablebonds are backed by MXN held by Kuspit Casa de Bolsa, S.A. de C.V., Grupo Financiero Actinver, S.A. de C.V., and Banco Bilbao Vizcaya Argentaria, S.A.
The second bond I purchased was the European Diversified Bond (Eurobond), a product backed by countries like Germany, France, and other nations in the European Union. This bond currently offers a 2.4% APY, but the interest rate may fluctuate depending on market conditions. EUROB Stablebond is backed by EUR held by Banco Bilbao Vizcaya Argentaria, S.A.
Next, I opted for the US Treasury Bonds, which are among the most trusted government bonds globally. These bonds currently offer a stable 5% APY, making them a reliable option for investors who prefer consistency without going through traditional brokers. USTRY Stablebond are backed by USD held by Grupo Financiero Actinver, S.A. de C.V.
Finally, I added the GILT bond, a British government bond available on the London Stock Exchange. The platform allows access to various bonds from around the world, each with its own set of terms, interest rates, and currency considerations. GILTS Stablebonds are backed by GBP held by Banco Bilbao Vizcaya Argentaria, S.A.
One of the key takeaways from this experiment is that currency plays a significant role in managing and diversifying investments. The currency risk associated with bonds denominated in currencies other than USDC, like the CETES (in Mexican pesos), presents both opportunities and challenges. Understanding the underlying currency’s movements is crucial when diversifying across multiple bond types and geographies.
You can watch a step by step guide on how to make your first purchase of stablebond in only 10 minutes including KYC, acquiring the tokens and divesting.
Comparison: StableBonds vs. Traditional Collateral Options
| Feature | Stable Bonds | Traditional Collateral Options |
| Accessibility | Available for as little as 1 USDC; supports fractional ownership. | Often requires substantial initial investment (e.g., minimum purchase sizes). |
| Liquidity | High liquidity with a 7-day maturity period and divest option for early exit (with a fee). | Liquidity depends on the type of collateral; early withdrawal may involve penalties. |
| Global Access | Available to most countries except the United States due to regulatory constraints. | Limited to local markets or specific jurisdictions; often requires physical presence. |
| Transparency | Transactions are tracked on public blockchains; Proof of Reserves ensures accountability. | Transparency depends on financial institutions; limited visibility into reserve holdings. |
| Diversification | Access to bonds from multiple nations, such as CETES, Eurobonds, US Treasury Bonds, and GILTs. | Options may be limited to the local market or specific asset types like real estate or stocks. |
| Yield | Competitive APYs (e.g., 9% for CETES, 5% for US Treasury Bonds). | Varies significantly based on the asset class (real estate, savings accounts, etc.). |
| Regulation & Security | Backed by government bonds and regulated entities in supported regions (e.g., Mexico’s Actinver). | Typically regulated but relies on institutional trust rather than blockchain verification. |
| Currency Risk | Exposed to currency fluctuations if bonds are denominated in foreign currencies (e.g., CETES in MXN). | Depends on asset type; currency exposure is usually limited to international investments. |
| Flexibility | Can be easily transferred, tokenized, and integrated into DeFi platforms for additional use cases. | Limited by the nature of the collateral (e.g., fixed-term deposits, real estate). |
| Barriers to Entry | Requires a blockchain wallet, stablecoins, and KYC compliance. | Requires traditional banking setup, credit checks, and often legal assistance. |
| Innovation Potential | Enables integration with DeFi platforms for financial innovation. | Lacks compatibility with emerging financial technologies like blockchain. |
Questions for Etherfuse
● What are the precise terms of the agreements between Etherfuse® and the brokerage houses?
● What level of control does Etherfuse® have over the bonds held in custody?
● How are the bonds accounted for and audited to ensure transparency and accuracy of the proof of reserves?
● What are the contingency plans in place if a brokerage house experiences financial difficulties or operational issues?
Conclusion
In conclusion, stable bonds represent a fascinating financial instrument tailored for a wide range of investors. If you’re someone with millions to invest, you may still prefer more traditional systems, but for the majority of people worldwide—especially small investors or those looking to start diversifying into government bonds—stable bonds offer an ideal platform. While there are challenges due to Etherfuse being based in Mexico compared to US or European competitors, these should not deter potential users, as blockchain-based applications are meant to be global in nature. What stands out about stable bonds is their integration of diverse options, ease of use, and their mission to democratize finance. These efforts exemplify how tokenization of assets should be executed, which is why I am pursuing my PhD in asset tokenization at the University of Nicosia in Cyprus.
I truly believe that in the next 10 to 20 years, the world will change, offering more investment opportunities and ways to save and diversify through tokenized assets like stable bonds. My recommendation? Start using it! Get a Phantom wallet, buy some fractional government bonds, and witness how the future unfolds.
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