Jack Kubinec

<div id="highlights-block_635fc152e273c" class="highlights">
 <ul>
 <li>Arbor, formerly Porter, will let DAOs issue bonds for interest rates as high as 20%</li>
 <li>Porter Finance’s original founder closed the platform in July, shortly after its launch</li>
 </ul>
 
</div>



In July, Porter Finance shut down its <a href="https://cms.blockworks.co/porter-finance-has-a-new-idea-to-help-daos-grow-defi-bonds/" target="_blank" rel="noreferrer noopener">DeFi bond issuance protocol</a> after just four weeks, citing a lack of demand. Four months later, three of Porter’s initial four developers are giving things another go under &#8220;Arbor.&#8221;



Porter Finance is rebranding to Arbor Finance today, forking its code while keeping the same core function — allowing DAOs to raise debt in stablecoins while using their native tokens as collateral. 



Arbor’s pitch is that DAOs seeking to hold their native tokens through the bear market will issue debt with the hope that the tokens will appreciate in value during the next bull run.



Deployed to the Ethereum blockchain, Arbor works by creating ERC-20 bond tokens that lenders can bid on. Lending yield will be higher than in the traditional finance world to account for the additional risk of often-volatile governance tokens — interest rates could be set as high as 20%, Arbor told Blockworks.



Arbor believes purchasing DAO bonds is better for investors than participating in a token sale or initial coin offering.



“The question isn&#8217;t, ‘is the token going to go up or down?’ The question is, ‘is the DAO going to be able to repay the principal plus interest at maturity?,’” Arbor co-founder Russell Bookland said.



Arbor also offers convertible bonds, meaning lenders can convert their bonds into DAO tokens before their bond matures.



<h3 class="wp-block-heading">DeFi devs bet Porter shutdown was premature</h3>



Shortly after launching in June, Porter Finance partnered with the DeFi lending platform Ribbon Finance and received $4.2 million in bids for its bonds. Given its initial success, Porter’s shutdown just a few weeks later was head-scratching. 



Arbor told Blockworks the decision came from Porter founder Jordan Meyer over objections from the rest of the team, who are now launching Arbor. The group declined to elaborate further, and Meyer did not return a request for comment.



In Meyer’s <a href="https://blog.porter.finance/porter-finance-is-shutting-down-bond-issuance-platform-bc8cb053f35d" target="_blank" rel="noreferrer noopener">blog post</a> announcing Porter’s shutdown, the founder said he was “not confident there will be large inflows of lending demand.” The Arbor team said it does not expect institutional investors to be a large initial source of capital.



Still, Arbor is betting on its protocol, even in a slumping crypto market.



“We saw quite a significant uptick in inbound demand as the market crashed because now DAOs were really feeling the pain point of not having very diversified treasuries,” Bookland said. “They didn&#8217;t have a robust stablecoin supply.”



And DAOs have been looking to make use of their treasuries in crypto winter. Last week, <a href="https://cms.blockworks.co/makerdao-votes-in-favor-of-rune-christensens-endgame-plan/" target="_blank" rel="noreferrer noopener">MakerDAO approved a proposal</a> to move $1.6 million of its USDC into Coinbase Prime. This summer, <a href="https://cms.blockworks.co/uniswap-to-create-foundation/" target="_blank" rel="noreferrer noopener">Uniswap launched a foundation</a> to <a href="https://www.axios.com/2022/08/05/uniswap-looks-to-spend-some-of-its-giant-treasury" target="_blank" rel="noreferrer noopener">grow</a> its ecosystem using treasury funds.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

arbor finance

DeFi Bond Issuer Porter Attempts Rebrand — Without its Founder

Macauley Peterson

<div id="highlights-block_629e3693694d1" class="highlights">
 <ul>
 <li>Ribbon DAO will issue $3 million of convertible bonds redeemable until December 4, 2022</li>
 <li>The bonds carry a maximum yield to maturity of 7%</li>
 </ul>
 
</div>



Two months after raising <a href="https://cms.blockworks.co/porter-finance-has-a-new-idea-to-help-daos-grow-defi-bonds/" target="_blank" rel="noreferrer noopener">its seed round</a>, DeFi upstart Porter Finance is bringing its first big idea to market.&nbsp;



The platform began offering convertible bonds for a DAO, on Monday, with Ribbon Finance’s DAO (decentralized autonomous organization) as its launch partner.



The convertible bonds — effectively zero-coupon bonds sold to investors seeking a fixed income — are secured by 50,000,000 RBN (Ribbon Finance&#8217;s native token) or about 16.1 RBN per bond, according to <a href="https://app.porter.finance/pdf/Ribbon%20DAO%20Prospectus.pdf" target="_blank" rel="noreferrer noopener">a prospectus</a>. That equates to about $15.2 million collateralized at 490%.



“This is a huge step forward for DAOs,” Jordan Meyer, Porter Finance founder, said in a statement, who called it “a completely new fundraising option for DAOs and a novel lending opportunity for investors.”



Ribbon DAO has around $170 million in assets under management via Ribbon Finance’s decentralized options vaults (DOV).



The Ribbon Finance protocol, operated via fully on-chain governance by Ribbon DAO, has generated about $4 million in revenues since October 2021, according to a statement.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Excited to be the first DAO/protocol to issue debt on-chain. This is a great way for protocols who have strong cash flows to raise money in a bear market without selling tokens 🎀 <a href="https://t.co/BlHIJ1IqF6">https://t.co/BlHIJ1IqF6</a>&mdash; Ribbon Finance (@ribbonfinance) <a href="https://twitter.com/ribbonfinance/status/1532573202659954688?ref_src=twsrc%5Etfw">June 3, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“Having consistent revenues, a large treasury, and strong execution history, Ribbon is the perfect example of a creditworthy DAO,” Meyer told Blockworks.



The prospectus notes Ribbon intends to use the net proceeds from sales of the bonds “for general purposes, including protocol-owned liquidity and bootstrapping the stablecoin supply in our covered call Fuse pool,” referring to a feature from Rari Capital that lets users borrow stablecoins against their Ribbon vault positions.



&#8220;This lets us collateralize our treasury RBN to raise cash today at a predictable rate,&#8221; a representative from Ribbon DAO told Blockworks.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;We are willing to give lenders some equity upside in exchange for better interest rates.&#8221;</blockquote>



Meyer expects this initial bond offering will catalyze a flood of similar deals.



“We are working to help more DAOs raise using the product and adding new features based on their feedback,” Meyer said. “We now have a large inbound of DAOs looking to follow in Ribbon’s footsteps.”



This story was updated on June 6, 2022, at 7:00 pm E.T. with comments from Ribbon DAO.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

convertible bonds

DeFi Convertible Bond Offering ‘a Huge Step Forward for DAOs’

<div id="highlights-block_624eff4114cec" class="highlights">
 <ul>
 <li>Porter Finance has closed a $5 million seed funding round for its DAO credit marketplace</li>
 <li>Included in the round were ParaFi Capital, Dragonfly Capital, Nascent Ventures, Buckley Ventures, Robert Leshner, Kain Warwick, Tyler Ward, Joey Santoro and Sam Kazemian</li>
 </ul>
 
</div>



When a DAO with a treasury full of tokens wants to raise cash for operations, its main option currently is to sell tokens, either through private sales or on the secondary market. Porter Finance plans to give these DAOs (decentralized autonomous organizations) a new strategic tool that’s more like issuing corporate bonds.



The platform will let DAOs borrow stablecoins at fixed rates, using their project’s tokens as collateral, with no liquidation risk. This is effectively a zero-coupon bond sold to investors seeking a fixed income, Porter Finance’s founder Jordan Meyer told Blockworks.



“No one has built out a DAO-friendly solution for borrowing yet, until now,” Meyer said.



<a href="https://www.porter.finance/" target="_blank" rel="noreferrer noopener">The platform</a> will enable DAOs to deposit collateral from their treasury, create a “DeFi bond” offering, at a discount to investors, and then let them repay the loan at the maturity date with interest set by the market.



“We are allowing the DAOs to choose how they want to structure [the offering]. The DAO can choose to allow-list the offering, and only allow KYCed or accredited investors or, if they want, they can make a public offering — it’s up to them,” Meyer added.



The platform’s front end will initially be designed to exclude users from the US or any sanctioned countries, due to regulatory uncertainty.



There are some important differences compared to bonds in traditional finance, namely the risk profile. DAO-issued bonds will not be senior in any corporate capital stack, nor are the contracts open to enforcement in bankruptcy, which is not practical for loans to DAOs. Instead, they are secured by the collateral in the Porter Finance smart contracts.



Lenders take on some directional price risk of the underlying collateral asset, but in exchange they receive an option premium set by the market at the time of the offering.



“That option premium — and that discount — gets priced during the auction. Market participants who are bidding, they decide what the implied volatility is for them, what the option should be priced at, essentially the market risk they are taking,” Meyer explained.



For the DAO borrower, the system provides a mechanism to finance working capital for operations without putting downward pressure on their treasury token price, losing governance rights or risking liquidation in a money-market fund like Rari Capital <a href="https://raricapital.medium.com/rari-capital-permissionless-fuse-pool-guide-ad4da19e0a17" target="_blank" rel="noreferrer noopener">Fuse pools</a> — now <a href="https://cms.blockworks.co/a-match-made-in-defi-rari-capital-and-fei-protocol-merge-to-feirari/" target="_blank" rel="noreferrer noopener">part of the Tribe DAO</a>.



<h3 class="wp-block-heading">A fortuitous climb</h3>



Meyer fleshed out the idea for Porter Finance on a climb of Mount Kilimanjaro in Tanzania in September 2021.



“You have 15 pounds on your back, but there are these other people who are helping you called porters…you would never make it up the mountain, in this 7-day trek, if you didn’t have the porters to carry the bags for you, or to help you up — and that was really impactful on me,” recalled Meyer, who named the protocol after these hardworking enablers.



<div class="wp-block-image"><figure class="alignright size-medium"><img loading="lazy" decoding="async" width="300" height="300" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Porter-Finance-logo-300x300.png" alt="" class="wp-image-19943" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Porter-Finance-logo-300x300.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Porter-Finance-logo-300x300.png?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Porter-Finance-logo-300x300.png?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Porter-Finance-logo-300x300.png?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Porter-Finance-logo-300x300.png?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Porter-Finance-logo-300x300.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Porter-Finance-logo-300x300.png?w=50 50w" sizes="auto, (max-width: 300px) 100vw, 300px" /><figcaption>The original logo of Porter Finance</figcaption></figure></div>



“We want to be able to empower DAOs to reach their peaks, their summits and their financial goals.”



The original logo of the platform was a green backpack, inspired by the packs porters carry, Meyer said, adding it was unfortunately mistaken for a robot. Its branding has since been revised in advance of a planned June launch on the Ethereum mainnet, following smart contract audits by <a href="https://secureum.xyz/" target="_blank" rel="noreferrer noopener">Secureum</a> and <a href="https://spearbit.com/" target="_blank" rel="noreferrer noopener">Spearbit</a>.



“We’ll go where the DAO treasuries are, and right now that’s Ethereum,” Meyer said.



<h3 class="wp-block-heading">A “massive market”</h3>



Porter Finance has closed a $5 million seed round with investments from ParaFi Capital, Dragonfly Capital, Nascent Ventures, Buckley Ventures, Robert Leshner, Kain Warwick, Tyler Ward, Joey Santoro and Sam Kazemian.



Nascent’s co-founder Dan Elitzer told Blockworks he jumped at the chance to back Porter after discussing a similar concept with Ben Forman, ParaFi’s founder and managing partner.



“Corporate debt is just an absolute massive market. And companies, if they have cash needs, they don’t just go and sell more shares…debt-based financing just makes a lot more sense — effectively cheaper capital,” Elitzer said.



“This is an important additional tool that DAOs should have in their toolbox,” he said.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Porter Finance

Newsletter

Blockworks Research