On-chain bonds, leverage, and the pursuit of a better global financial system.

Introduction

The world deserves a highly functional decentralized financial system for fair and transparent global commerce, and to absorb liquidity and preserve capital when governments and institutions make decisions that are adverse to public interest. Today, users of the decentralized financial system are forced into a limited array of products that don’t perfectly meet their idiosyncratic risk-return profile and limit the free movement of their funds. The limited scope of available investment products and lack of composability in decentralized finance limits the involvement of a large group of retail and institutional investors.

Programmable derivatives unlock the ability to introduce a wide array of tailored products backed by any asset, including decentralized bonds that pay stablecoin yields (bondETH) and liquidation-proof leverage on decentralized assets (levETH), without sacrificing composability with the broader decentralized financial system.

Plaza is the first platform for programmable derivatives - tokenized vault structures that enable any risk-reward profile on any asset without sacrificing cross-chain composability. bondETH (a high yield bond that pays USDC yield) and levETH (liquidation free leverage) are the first programmable derivatives.

The Problem: Limited Choice, Short Term Focus, & Trapped Funds

1. DeFi Lacks the Full Spectrum of Investment Products

• The products available in DeFi are heavily skewed towards various forms of leveraged trading: perpetuals, power perpetuals, options, etc. Cryptocurrencies are still in the early adoption phase, and thus the user base is skewed towards investors with a high risk tolerance. Naturally, the DeFi products that have thrived, most notably perpetual futures, are geared toward these risk-seeking investors.

• Traditional financial markets have a wider array of products appealing to a broader set of investors: corporate bonds, structured products, commodities, portfolios combining many forms of assets, and more. If the DeFi ecosystem is to expand beyond the current investor-base of predominantly high-risk-seeking investors, new liquid products need to be introduced to match the composition of available products in the traditional financial system. Because of innovations surrounding liquidity pool architecture and blockchain design, the decentralized financial system can exceed the capabilities of the traditional financial system through programmable derivatives with unified liquidity.

2. Existing Leverage Products Are Short-Term Focused and Trap You in a Walled Garden

• The existing DeFi user-based is currently dominated by investors who fundamentally believe in the underlying blockchain technology and thus often want leveraged exposure to the growth of the technology. As a result, leverage is one of the few products that has found significant product market fit within DeFi, despite the limitations of the existing offerings.

• Perpetual futures are a great product for users seeking high amounts of leverage to trade cryptocurrencies over short time horizons, but they are not well suited for long-term investors.

  • Many investors would like long-term levered exposure to cryptocurrencies but don’t want to or are unable to stare at 5-minute candles all day to avoid liquidation. Platforms have an incentive to push users towards high levels of leverage that cause them to get liquidated under regular market volatility to drive volumes and fees. Investors who trade with 30x leverage on assets with 5% daily volatility are likely to get liquidated within a few days even if their trade is directionally right over a 1-week horizon.

  • In bull markets, funding rates are 60%+ for even “blue-chip” cryptocurrencies, because platforms need to match an equal number of buyers and sellers, and sellers need to be compensated highly to take a position against market momentum.

  • Further, perpetual futures offer decelerating gains as prices move with investors’ positions, and accelerating losses as prices move against investors’ positions. This wrong-way convexity is unattractive, especially when there is significant market volatility.

  • Perpetual futures are entirely synthetic and not backed by hard assets, which makes it impossible for platforms to represent perpetual futures positions as tokens to use across DeFi. This ties the hands of users - they don’t have the flexibility to do more with their perps positions outside of what the exchange offers.

• Borrowing on lending platform for levered exposure has the same constraints as perpetual futures.

3. Yield in DeFi Lacks True Price Discovery and Composability

• The most common yield product in crypto is lending on a lending market. The utilization of these lending markets programmatically drives the yield paid to lenders. The market is unable to find true price/yield discovery if the same utilization rate of lending market should demand a higher or lower yield based on the other factors at play in the broader financial system.

  • This limits users into a “yes or no” binary decision when choosing to participate in lending markets, and the inability to speculate on future yields or get compensated if yields are lower in the future than they are today.

• Lending platforms and yield generating vaults typically suffer from the same composability problem as perpetual futures exchanges - your assets are trapped on a single venue without the flexibility to do more with your position.

The Plaza Solution: Programmable Derivatives

Programmable derivatives are tokenized, structured-asset vaults that split and repackage the total return of any underlying (ETH, BTC, SOL, or eventually real-world assets) into easily tradable ERC20 tokens.

1. Asset-Backed

   All Plaza derivatives are redeemable for the actual vault asset—giving them deep liquidity inherited from the spot markets, rather than from a thin synthetic futures pool.

2. Infinite Customization

   A single vault can produce multiple tokens—bonds, leveraged tokens, or any structure that suits a specific risk-return preference.

3. Composability

   These tokens can be moved across chains via existing bridging infrastructure, deposited into lending markets, or even parked in cold storage.

4. Unified Liquidity

   The capital for all these derivatives comes from a single, aggregated vault, preventing the liquidity from fracturing across dozens of one-off markets.

5. Price Discovery

   Programmable derivatives can find a market-clearing price, allowing for true price discovery in leverage and yield markets.

Plaza’s First Products: bondETH & levETH

Right now, Plaza Finance offers bondETH (an on-chain USDC-paying bond) and levETH (liquidation-proof, levered exposure to ETH). Both are backed by a shared pool of ETH liquid staking tokens (LSTs) and liquid restaking tokens (LRTs).

1. bondETH - built for investors seeking stability and USDC yield.

   • USDC Yield: bondETH holders earn quarterly stablecoin coupons, paid by an auction mechanism that swaps part of the vault’s ETH LSTs/LRTs for USDC.

   • Overcollateralized: It’s like holding a bond that’s constantly secured by a pool of ETH derivatives—no margin calls, no forced sales.

   • Composable: bondETH can be bridged anywhere and used across DeFi.

2. levETH - built for investors seeking long-term leverage.

   • Liquidation-Free Leverage: levETH gets the “upside” leftover once bondETH’s coupons are paid, effectively creating a leveraged position on ETH without the usual risk of liquidation.

   • Dynamic, “Right-Way” Convexity: As ETH prices rise, more capital is expected to flow into bondETH, indirectly boosting levETH’s leverage. If ETH falls, less capital is expected to flow into bondETH, indirectly deleveraging levETH.

   • Composable: levETH can be bridged anywhere and used across DeFi.

Beyond ETH: BTC, SOL, and RWA

Plaza started with ETH, the most liquid and developer-friendly network. But the vision is much broader:

• Decentralized Asset: After launching bondETH and levETH, the next frontier for Plaza is BTC and SOL programmable derivatives, and programmable derivatives on any token that trades in the decentralized financial system.

• Real-World Assets (RWA): Tokenized treasuries, real estate, music royalties—over time, Plaza can incorporate any on-chain asset, offering sophisticated yield or leveraged structures that rival traditional investment banks but with global accessibility and liquidity.

The Bigger Mission: Disintermediating Global Investment Banks

Plaza’s vision goes beyond just DeFi. Programmable derivatives are the next wave of global capital markets infrastructure, replacing the multi-million-dollar fees and opaque processes of broker-dealers with open, permissionless protocols. In the same way that mortgage-backed securities helped scale the U.S. housing market, on-chain derivatives could scale and democratize access to everything from small business loans to global bond markets.

1. No More Rent-Seeking Intermediaries

   Banks and underwriters that once took huge fees can be replaced by trustless smart contracts that distribute risk fairly and transparently.

2. Open Access

   Any retail investor can hold the on-chain bond or leverage token, and any institution can deposit capital directly without gatekeepers.

3. Global Liquidity

   Once a derivative is tokenized, it can be traded or used as collateral around the world—in minutes, not months.

4. Incentive Aligned Fee Markets

   Instead of paying ongoing servicing and management fees, asset issuers can share in the fees generated for creating asset-backed structures.

We’re just getting started.

Stay Connected

• Website: plaza.finance

• Docs: docs.plaza.finance

• Twitter/X: @plaza_finance

• Discord: discord.gg/plazafinance