The DeFi Bond Market

A stereotype of 1980s greed is Michael Milken. Known as the “Junk Bond King”, Milken created a means for startup companies to reliable raise capital. The term “junk bond” was due to the fact that the companies involved were yet to establish a credit rating.

According to the Gentlemen’s Journal, “Milken developed a unique ability to sense changes in the financial world that others were too lazy or unimaginative to detect.” Specifically, he pioneered using bond funding to finance strategic acquisitions. A legacy tarnished by his 1989 indictment for securities fraud.

Instead of one entity such as a bank assuming 100% of loan default risk, corporations, and governments issue bonds. These contracts spread the risk over many investors. In return, the company issuing them is obligated to pay back the principal with interest — making regular payments to investors.

Sometimes corporations default. Leaving investors with worthless paper. However, much of the time bonds prove to be a stable asset within an investor’s portfolio — providing a source of reliable income.

Startup Investing

Angels are private investors that fund new companies with relatively small loans. These loans are either paid back at the next round of funding or convert to stock. The purpose is to help a company go from zero to an initial…