Bonds...Bitcoin bonds...everywhere!
I remember first hearing about Bitcoin bonds several years ago when El Salvador was going to build a city on top of a volcano and plug miners into the lava so they could do infinite bitcoin mining and they were going to pay for it all with these cool bonds that Blockstream somehow was facilitating. I certainly didn't feel like I had a good handle on what was going on at the time.
Now, we have the Bitcoin Policy Institute proposing Bitcoin bonds as part of the solution to the US's $36 trillion dollar problem, Microstrategy is so far into bonds that Saylor is about to start calling himself double-o-21, and Pierre Rochard has started a company called The Bitcoin Bond Company with a website that really embraces clean and simple.
But I'm still lost as to what a Bitcoin bond actually is. I'll admit this might be because I haven't fully wrapped my head around what a normal bond is.
What is the difference between a bond and a loan?
Those with a financial (or even basic) education will no doubt mock me now, but can we take a moment to marvel at the fact that a bond is basically just a loan?
Like many concepts in finance, I have always felt a little deceived by bonds. Everybody talks about bonds like they are so much better than loans -- the word even sounds solid, not risky like a liability. Bonds come to maturity while loans are called or due or even delinquent. Bonds have a coupon, while loans have interest payments. But, pretty much, a bond is just a loan.
When you buy a bond, you are loaning someone money with the hope that they pay you back later (with interest). If you really want to get into the details, a bond is usually paid back all at once at the end of its term, while loans are paid back with regular installments until they are settled.
Maybe the difference is that most discussion is conducted from a retail perspective: retail wants to be offered a loan but they want to buy a bond.
The first Bitcoin bonds
So, if we have a rough concept that a bond is a loan, then a bitcoin bond is a bitcoin loan -- that, at least, is where it started out.
In early 2011, a Bitcointalk user named grondilu issued a bitcoin bond for 100btc to be paid back after 4000 blocks. The bond ended up selling for 96.1btc. I believe this was the first bitcoin bond floated in public.
It wasn't too long before the Global Bitcoin Stock Exchange (GLBSE) was launched. You could sell shares of a company or float bonds and do futures contracts on the exchange.1 This announcement post on BitcoinTalk even links to a sample bond contract, but sadly it's no longer live and the Wayback Machine didn't crawl it. Things didn't end well when GLBSE shotgun KYC'd their users in 2012, but I'm not sure what people expected given the exchange was founded by a guy named Nefario...
As a side note, in 2011, Bitcoin bond also could still mean a surety bond (the operator of a future's market put up 50btc bond to prove his honesty. Winners of the market got 5.72btc and 3.84btc). Such surety bonds still show up in Bitcoin today (Fidelity bonds).
Takeaway: in 2011, Bitcoin bonds were loans of bitcoin paid in bitcoin.
Overstock TIGRcub bonds and UBS Smart Bonds
In June 2015, Overstock announced that it was issuing a bond using colored bitcoin. They had a deal with Counterparty and the main selling point of the bond seems to be that it settled much faster than normal bonds. It didn't sell well.
In 2015, Swiss bank UBS claimed they had developed a "Smart bond" that was powered by "the blockchain." There are a number of references to these bonds using Bitcoin but I couldn't find any reference to an actual txid (on mainnet or testnet) and it looks like they actually meant to say Ethereum.
Whatever the case, in 2015 we have Bitcoin bonds meaning at least some of the logic of the loan is implemented in script on a blockchain.
Microstrategy's convertible bonds
In 2020, Microstrategy issued $650M of convertible 5-year notes (notes are apparently how one should refer to bonds that mature rather quickly) to raise money to buy bitcoin. These bonds are not bitcoin loans nor do they have anything to do with smart contracts or logic enforced by Bitcoin script -- they are just normal corporate loans...but Saylor used the money to buy bitcoin which sounds a lot like a speculative attack.
The idea behind a convertible bond is that you can convert the bond to shares in the company at some pre-specified share price. In the case of MSTR, usually this price is a lot more than the price shares trade at when the bonds are issued. Investors can hold the bond to maturity and get their money back plus interest (except most of the Microstrategy bonds don't offer any interest) or if at any point during the bond's term MSTR trades at a price above the convert price, they can convert their bonds to shares and take a nice little profit. It has apparently been working well for folks.
For the purpose of those of us who would like to understand Bitcoin bonds, the takeaway is that, in 2020, this is a loan of US dollars to buy bitcoin. It gets paid back in dollars (or shares of MSTR if bond-holders choose to convert). The only thing that makes it Bitcoin-related is that Saylor says he's going to buy bitcoin with it.
Volcano Bonds
When Bukele announced a Bitcoin bond to fund a Bitcoin mining enterprise (and a new city?) that would be powered by electricity generated from a volcano, it was yet another departure from a Bitcoin loan.
The volcano bond was denominated in dollars and was going to be sold in dollars. According to the termsheet (pictures of the slide Bukele used to introduce the bond) the plan was to raise $1 billion with a ten-year tenure and a 6.5% coupon. El Salvador was going to use $500M of the money from bond sales to buy bitcoin which it would hold for 5 years before gradually selling this bitcoin and returning 50% of the proceeds (over the initial investment) back to investors.
This bond was announced in 2021 and continually teased until 2023 when it got "tweaked" into a private equity deal where investors get equity in a Bitcoin mining operation (yet to be built). Oddly, the National Bitcoin Office of El Salvador posted that the bond was approved to be issued in Q1 2024...and then never really mentioned it again.
Then earlier this year, in order to reach an agreement with the IMF to get a much needed loan, El Salvador had to scale back it's pro-Bitcoin laws. It's unclear how this agreement affects any remaining plans to issue a bond, but it probably doesn't increase the likelihood we see such a bond soon.
So in 2021 we have a government issuing bonds with a promise to buy bitcoin with some of the money and share some of any bitcoin price appreciation with their bond holders. However, what's weird about this is that it's a bad deal: you would make more just buying bitcoin.
US Gov't Bitbonds
Now, in 2025, we get to Bitbonds. As proposed by the Bitcoin Policy Institute,2 these are particularly low interest (1%) 10-year bonds issued by the US Treasury that would require the government to purchase bitcoin with 10% of the money raised from the sale of the bonds. Upon maturity, investors receive 100% of any gains from bitcoin price appreciation up to a 4.5% total compounded return, and share any remaining bitcoin upside 50/50 with the government.
The BPI says the Bitbonds are a way for the government to get cheaper debt and potentially add to its "strategic Bitcoin reserve". An investor would still do better to just buy bitcoin, but these bonds are backed by the "full faith and credit of the United States government" -- apparently that it still a meaningful statement to some people. Also, many buyers who are not able to buy bitcoin (this needs a separate article itself: who are these entities who "cannot" buy bitcoin and why can't they? I've never understood that) likely can buy US treasury bonds.
Taking the Bitcoin bond to an even further extreme, Sberbank launched a "bond tied to Bitcoin" in early June that somehow is tied to Bitcoin price in USD. Their announcement on their website was light in details, with the main selling point being that "investors do not need to open a cryptocurrency wallet or make operations on unregulated foreign platforms."
In 2025, Bitcoin bonds mean a US dollar loan to a government so it can buy bitcoin...or just price exposure to bitcoin for people who can't otherwise get it.
The Bitcoin Bond Company
Pierre Rochard launched his new company, The Bitcoin Bond Company, with a nicely worded memo. The memo seems pretty clearly aimed at corporate bonds, rather than municipal or government bonds. But as far as I can tell from listening to a few podcasts (Pierre has recently turned into a master of podcasts), these bonds are loans of US dollars for the purpose of buying Bitcoin.
On TFTC, Pierre said,
We need to recapitalize hundreds of trillions of dollars of bad debt with better collateral.
My understanding of municipal and US treasury bonds is that you don't so much care what the money is used for as much as you care whether issuer has (and will continue to have) the cashflow to pay the bond + coupon. Such bonds aren't backed by an asset so much as the power of violence wielded by the state (they can tax people and seize their property if they don't pay).
I'm amenable to the argument that Bitcoin is better collateral than serfs and also the argument that, at least on the federal level, because politicians don't like to overtly raise taxes they opt for taking on more debt and so we might as well force them to buy some bitcoin with it.
Corporate bonds, like the ones Microstrategy3 issues, are backed by traditional assets, and so I suppose the argument that bitcoin is better collateral makes some sense there.
New York City Bitbonds
At the Bitcoin Conference in Las Vegas, Mayor Adams announced that he was going to push for Bitbonds in NYC. Adams was light on details, but he said the bond was going to be for holders of bitcoin to be able to invest in city bonds, as if the bonds were going to be loans of bitcoin to the city.
Shortly after his announcement, the New York City Comptroller issued a statement nixing the idea. The Comptroller claimed that New York City only issued bonds to pay for capital improvements and didn't have any way to do this with bitcoin. Also he said they were incapable of converting bitcoin received from the bond to dollars.
Shockingly, the New York City Bond proposal (if the opaque statements of two government officials can be taken as the term sheet) is the closest to the origin of bitcoin bonds.
Why would anyone ever buy such a thing?
My biggest question about the Bitbonds phenomenon (in its recent iteration) is why anyone would buy a bitbond instead of bitcoin?
Best arguments I can think of are:
- You "can't" buy bitcoin (regulatory arbitrage).
- You are worried bitcoin is going to go bust and you want downside protection.
- You like to give your money away?
Footnotes
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In the original command line client all values on GLBSE were in sats -- although I haven't been able to figure out if they called them sats or not. Were they BIP 177 groupies? ↩
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A fellow named Brian Estes wrote a proposal for Bitbonds in February 2025, but it didn't get as much attention as the BPI proposal. I don't know if he's connected to them or not. ↩
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In the same way that I can't reasonably refer to a company that calls itself Good or Honest or Awesome by any such name, I'm not able to call the company Strategy. ↩
"who are these entities who "cannot" buy bitcoin and why can't they?"