How Is the Interest Rate of a Floating-Rate Smart Bond Determined and Updated by the Contract?

For a floating-rate smart bond, the smart contract relies on an oracle to fetch the current reference interest rate (like SOFR or LIBOR) from a reliable external source. The contract is programmed with a predefined schedule for updating the rate (e.g. quarterly).

On each reset date, the smart contract calls the oracle, retrieves the latest reference rate, adds the agreed-upon spread (e.g. SOFR + 2%), and automatically calculates and applies the new coupon rate for the next payment period.

This entire process is automated, transparent, and removes the need for a manual calculation agent.