Originally intended to be an innovative electronic payment system, the new technology Bitcoin could have a disruptive impact on other industries as well. Blockchain enthusiasts, private companies, government and academic institutions are currently trying to stake out and unlock the full spectrum of the technology's potential.
Capital market transactions are among these use cases as many players are involved in these transactions, resulting in high costs and long transaction times. By integrating blockchain technology into the settlement of security transactions, the cost and complexity of the processes might be reduced. As Christian Schäfer explains, the crucial instrument for the realization of these potentials are smart contracts, enabled by the Ethereum Blockchain.
In his books, Schäfer examines the technical feasibility of a smart contract that enables the issuing and trading of corporate bonds without intermediaries. The key features for the smart contract have been derived from the payment mechanisms of a bond and the standard for token contracts established within the Ethereum developer community. The requirements for the smart contract could be implemented successfully, as confirmed by the documentation of two simulations.
In this book:
- Internet of Things;
- solidity;
- token;
- ERC20 standard;
- corporate bonds
Table of Contents
1 Introduction
2 Smart Contracts
2.1 Solidity
2.2 Tokens
2.3 ERC20 standard
3 Corporate Bonds
4 Requirements for the Smart Contract
5 Remix
6 The Bond Token Smart Contract
7 Simulations
7.1 Simulation one
7.2 Simulation two
8 Evaluation of the smart contract
Objectives and Topics
The primary objective of this thesis is to assess the technical feasibility of utilizing blockchain technology—specifically smart contracts on the Ethereum platform—to facilitate the issuance and trading of corporate bonds without the need for traditional intermediaries. The study explores how core bond mechanisms can be mapped onto programmable smart contracts while adhering to established token standards.
- Blockchain technology integration in financial markets
- Technical design of smart contracts for fixed-interest corporate bonds
- Implementation of the ERC20 standard for security tokens
- Development and testing in the Remix Integrated Development Environment (IDE)
- Simulation of bond issuance, coupon payments, and secondary market trading
Excerpt from the Book
The Bond Token Smart Contract
This section introduces the program code of the developed smart contract and explains its functions. The complete program code can be found in the appendix. The screenshots in this chapter were taken in the open source text editor Atom for better readability and not in the Remix IDE, where the actual coding took place.
The syntax of the first line specifies that the source code is written for Solidity version 0.4.24. As already stated in the Remix chapter, this version has to be consistent with the selected compiler version in the “Settings” section. The seventh line commands the creation of a contract with the name BondContract, which in the following is also called Bond Token Smart Contract or Bond Token Contract.
The combination of the struct AccountBondData and the mapping BalancesOf store bond data and link it to an investor's account. It connects four variables, of type unsigned integer with 256 bytes, grouped together by the struct, to one Ethereum address. The mapping has a visibility status public, in order to make the values of the struct variables accessible and to meet the second required function of the EC20 standard. The first variable of the struct, SumOfBondToken, records the number of all bonds held by a single account. The second variable, SumOfFaceValues, represents the total of all bond’s face values assigned to an account. The third variable contains the amount of coupon interests, which has been transferred to an investor’s address, memorized by the SumOfTransferredCoupons variable. The fourth variable within the struct, TimesCouponTransferredToAccount, serves as counter variable for how often the coupon payments have already been made.
Summary of Chapters
1 Introduction: Provides an overview of the disruptive potential of blockchain in finance and outlines the motivation for developing a bond-focused smart contract.
2 Smart Contracts: Explores the conceptual foundations of smart contracts, the Solidity language, and the importance of the ERC20 token standard.
3 Corporate Bonds: Details the economic mechanics of fixed-interest corporate bonds and the mathematical logic behind valuation and cash flow.
4 Requirements for the Smart Contract: Defines the specific technical requirements for the contract, including issuance parameters and transaction types.
5 Remix: Introduces the Remix IDE as the development environment and explains its primary features for compiling and testing contracts.
6 The Bond Token Smart Contract: Presents the source code and functionality of the contract, explaining how data is stored and how logic is executed.
7 Simulations: Documents two practical scenarios testing the contract’s issuance and trade functionality to verify successful implementation.
8 Evaluation of the smart contract: Discusses the results of the simulations, identifies limitations in Solidity, and addresses future research needs regarding automation and regulation.
Keywords
Blockchain, Ethereum, Smart Contracts, Solidity, Corporate Bonds, Tokenization, ERC20, Remix, Securities Settlement, Digital Assets, Financial Technology, Decentralized Finance, Coupon Payments, Bond Trading, Financial Innovation
Frequently Asked Questions
What is the fundamental focus of this thesis?
This thesis investigates the technical realization of issuing and trading corporate bonds on the Ethereum blockchain, aiming to remove the reliance on central intermediaries.
What are the primary themes discussed?
The work covers blockchain fundamentals, smart contract programming in Solidity, financial modeling of corporate bonds, and the application of standardized token frameworks (ERC20).
What is the core research goal?
The goal is to determine the feasibility of creating a functioning smart contract that handles bond lifecycle events, such as issuance, coupon payment, and redemption.
Which scientific methods are employed?
The author uses a constructive development approach, programming the contract in Solidity and validating its functionality through simulated scenarios in the Remix IDE.
What topics are covered in the main section?
The main part encompasses the theoretical grounding, technical requirement analysis, code documentation, and the execution of simulations to verify the contract's logic.
Which keywords define this work?
Core keywords include Blockchain, Ethereum, Smart Contracts, Corporate Bonds, ERC20, and Tokenization.
How does the contract handle bond coupon payments?
The contract includes specific functions that allow the issuer to transfer coupon interests to investor accounts based on their registered token holdings.
What is the significance of the "Simulation two" chapter?
Simulation two focuses on secondary market trading, verifying that the smart contract can handle the transfer of bond tokens between two investors and manage compensation adjustments.
What does the author identify as a major limitation of Solidity?
The author highlights the lack of native support for fixed-point decimals, which makes high-precision financial calculations complex and potentially error-prone without specific workarounds.
Are legal implications included in the study?
No, the thesis focuses strictly on the technical implementation of the smart contract; legal and regulatory requirements for offering such financial products were excluded.
- Citation du texte
- Christian Schäfer (Auteur), 2020, Bringing Blockchain to Corporate Finance. A Smart Contract for Corporate Bonds, Munich, GRIN Verlag, https://www.grin.com/document/511342
