On-Chain Government Bonds: Implications for DeFi Collateral
DeFi’s landscape, long shaped by novel lending, borrowing, and collateral methods, is facing a shift: on-chain government bonds. As sovereign debt gets tokenized, DeFi could access highly trusted financial instruments, introducing unprecedented opportunities but also new risks and complexities. Understanding On-Chain Government Bonds At its core, an on-chain government bond is a digital representation of a traditional sovereign debt instrument, recorded and traded on a blockchain. These tokenized bonds carry the same legal and financial backing as their conventional counterparts but are programmable, divisible, and instantly transferable across borders without intermediaries. The advantages are clear: higher transparency, real-time settlement, and potential for fractional ownership. For investors, it opens the door to exposure in government debt markets without relying on brokers, banks, or clearinghouses. Why DeFi Needs Reliable Collateral DeFi lending protocols rely heavily on collat...