> For the complete documentation index, see [llms.txt](https://docs.obligate.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.obligate.com/obligate/enote-protocol.md).

# eNote Protocol

Mechanics of an eNote issuance.

## Overview

Obligate supports bullet bond\* issuances through smart contracts on public, permissionless blockchains. Obligate sets the off-chain terms and allocations. The issuer confirms them with an on-chain signature, which deploys the bond and opens the funding window. Investors fund their allocated orders through escrow. When funding completes, the smart contract exchanges funds and bonds between the issuer and investors. Obligate identifies and whitelists primary-market participants. Investors are free to transfer their tokens to other wallets in the secondary market, unless the smart contract includes issuer-defined transfer restrictions.

<sup><sub>\*A<sub></sup> [<sup><sub>bullet or straight bond<sub></sup>](https://www.investopedia.com/terms/b/bulletbond.asp) <sup><sub>is a type of debt security that, unlike an amortizing bond, repays the entire principal amount in a single lump sum at maturity rather than through periodic payments. Interest payments may also be made at maturity, together with the principal repayment, or in regular installments during the loan term.<sub></sup>

## Book building

Book building takes place on the Obligate platform. Bond terms and allocations are agreed off-chain. Obligate facilitates the agreement between issuers and investors, making both parties legally bound to their commitments.

Issuers define the bond structure, including the interest rate, coupon frequency, maturity date, transfer restrictions, and collateral (if any). Investors submit their order preferences. Both parties provide legal signatures, committing to issue or fund the agreed orders. Obligate never acts on behalf of the issuer or the investor or as a counterparty to the issuer or investor in any eNote transaction on the Obligate platform.

Bonds are denominated and settled in USD, EUR, and CHF stablecoins, including USDC, EURC, and stablecoins from other issuers.

## Issuance and funding

After book building, Obligate prepares a smart contract with the agreed bond terms and allocations. The issuer reviews the contract against the book-building agreement. The issuer confirms the contract with an on-chain signature. This deploys the bullet bond smart contract and opens the funding window.

Investors fund their orders by paying into the smart contract's escrow account.

On the issuance date, bonds are issued to investors and funds are sent to the issuer's payment wallet address.

## Bond holding period

From issuance until maturity, investors hold bonds in their own wallets. They can transfer or sell them to other investors, unless the smart contract includes issuer-defined transfer restrictions.

## Coupon payment

Before the coupon payment deadline, the issuer transfers the amount due to the escrow smart contract. On the scheduled payment date, each eNote holder receives a transferable payment-redemption token. Investors burn these tokens to receive their coupon payment from the smart contract.

## Maturity

At maturity, the issuer transfers the full obligation, including principal and the final coupon, to the escrow smart contract. Each eNote holder receives payment-redemption tokens. Investors burn these tokens to redeem the principal and final coupon.

## Collateralized bond

Issuers can optionally secure bonds with collateral. The security agreement provides for liquidation of the collateral if the issuer defaults. Collateral can include crypto assets, receivables, and other assets.

## Compliance

Issuers may define legal and technical selling and transfer restrictions to ensure compliance with their local laws and regulations. It it the responsibility of the issuer, or the person acting on behalf of the issuer, to determine whether applicable prospectus or other disclosure or registration requirements may apply to their issuance.

## Audits

Obligate deploys smart contracts based on audited standard implementations or contracts that have been audited independently.