Liquidity Bonds

What are Liquidity Bonds?

Liquidity Bonds are a simple primitive unique to Cardano DeFi. They are built on and leverage Cardano’s well-evolved and distinctive staking system.

Put simply, Liquidity Bonds allow anyone to borrow or ‘rent’ ADA staking rights and associated staking rewards for a fixed period of time. Bond ‘issuers’ (borrowers) deposit interest into a smart contract, while bond ‘buyers’ (lenders) deposit ADA into a smart contract. Borrowers control the staking delegation of a lender’s ADA, can attach any stake key, delegate wherever they please, and receive all staking rewards associated with the borrowed ADA.

Substantial collateral is not required from borrowers as with normal loans. The only requirement of borrowers is to pay interest into a bond to compensate lenders for the staking rights to their ADA. Lenders do not actually give borrowers custody of their ADA.