Blockchain & Cryptocurrency Glossary

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Digital Bond

1 min read
Pronunciation
[di-ji-tl bond]
Analogy
Like a traditional government bond printed on a digital certificate that can be divided into tiny pieces and traded instantly on a secondary market.
Definition
A tokenized debt instrument issued on a blockchain representing a loan obligation with fixed interest and maturity, offering increased transparency, fractional ownership, and automated settlement.
Key Points Intro
Digital bonds bring bond markets onto blockchain for efficiency and accessibility.
Key Points

Tokenization: Bond principal and interest rights encoded in tokens.

Programmable: Coupons and redemptions executed via smart contracts.

Fractionalization: Investors can hold small slices of large bond issues.

Transparency: Ownership and payment history visible on‑chain.

Example
A municipality issues a $10 million digital bond on Ethereum; investors buy ERC‑20 bond tokens and receive automated interest distributions.
Technical Deep Dive
Issuance contract mints bond tokens with metadata (coupon rate, maturity). A payment schedule triggers `transfer()` of interest tokens from issuer treasury. Redemption burns tokens at maturity. On‑chain registry tracks token holders.
Security Warning
Smart contract bugs in payment logic can freeze coupons or principal redemptions.
Caveat
Regulatory compliance (KYC/AML) must be handled off‑chain or via permissioned contract layers.
Related Terms
Security Token
Smart Contract
Tokenization
ERC‑20

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