DeFi protocol Porter Finance shuts down bond issuance platform after just one month

Porter Finance, a decentralized finance, or DeFi, protocol based on the Ethereum (ETH) blockchain, announced Tuesday that it was shutting down its bond issuance platform. In explaining the discussion, Porter Finance said:

“Looking forward, we are not confident there will be large inflows of lending demand for fixed income DeFi products like the ones offered through Porter Finance. This is primarily due to the competitiveness of rates offered in traditional finance and the lack of institutional fixed income DeFi adoption over the past year. We are also no longer willing to take on the legal risk associated with bond offerings.”

Just last month, Porter Finance unveiled the first-of-a-kind service in partnership with Ribbon DAO to issue 3,103,224 convertible bonds redeemable for 1 USDC with a maturity date of Dec. 4, 2022. At the time, each bond was issued at a discounted price of 0.9667 USDC per bond with a yield to maturity of 7% after accounting for interest. 

In addition, each bond is secured by 16.112 Ribbon Finance tokens ($4.78 at the time of June announcement) and convertible for 1.111 RBN. It appears significant over-collateralization was required for the issuance of the bond. The instrument also had a significantly higher borrowing cost than money-market securities of the same maturity.

In light of the recent implosion of notable DeFi lenders such as Celsius, investors have taken a risk-averse approach to borrowing and lending on decentralized protocols. The total value locked in such projects tracked by DeFi Llama has plunged nearly 70% since the beginning of the year. The Portal Finance offering, characterized by its underlying smart contract, will remain active until all Ribbon DAO lenders redeem or convert their bonds.