I'm definitely in favor of the idea of interest that fluctuates according to the time deposited. That is pretty much how the world works, across a very wide swath of our experience: Low risk, low rewards, high risk, high rewards.
I also like this better than the current chatter about reducing the rate on HBD. It's overly simplistic.
I suppose treating each individual "contract" as an NFT makes sense, in a way... as does the idea of having a marketplace where people can trade aftermarket bonds, prior to maturity. Still, I'm a little challenged by the whole "Layer 2" aspect here, since that tends to be a lot more centralized in our ecosystem.
There is no smart contracts on the base layer.
As for the centralization, depends upon the node system that is running the contract and exchanges.