In an attempt to solve it’s debt problems, the Austrian Government is looking to employ the use of Blockchain technology. The Austrian Government which has fallen into deep debt is looking to issue bonds which it will create using the Ethereum network. The auction is going to raise about 1.15 billion euros from investors.

Why Bond Auctions?

Come October 2, 2018, the Government will be auctioning bonds worth 1.15 billion euros to investors from across the world. There will be two types of bonds presented by the country. The first type of bond is expected to have a 5-year maturity, while the second type will take 10 years before it reached maturity. The 10-year maturing bond is with an interest rate of 0.78% per annum, which is expected to compound over this period.

Bonds in General

Government bonds work similarly to an IPO or ICO but without the high level of risk as well as return on investment. In the case of a bond auction, the government is selling a stake in its tax returns and internal revenue. This means the buyer of such bonds will be compensated based on tax the government with be receiving from its citizens as well as the return on sales of its natural resource products and also some other money making avenue it possesses. Unlike ICO where the returns an investor might be getting is quite high, the return on bonds sales are much lower. This low rate of return is compensated with the fact that the return on bonds auction is almost certain.

How the Bonds Will be Issued

The OeKB (Oesterreichische Kontrollbank) is the one with the permission to oversee the auctioning of these bonds. Bonds will be issued using the Ethereum blockchain network. This is an effort by the Government to minimize the costs of operation and also maximize efficiency. The network will also be used for authentication of the bonds. However, the government has made it clear that this is not a token sales. This means the bonds issued on the network are not available for sales or be treated like a traditional token.

The success of this will be a determinant for other Governments in similar situations to follow this footstep.