Term Finance Introduces Revolutionary Fixed-Rate Lending Protocol to DeFi Market
Term Finance, a noncustodial, fixed-rate lending protocol, has been launched to provide users in DeFi with transparent, scalable and trustless access to liquidity on fixed terms. The platform is different from other DeFi lending protocols as it uses an on-chain auction double-auction mechanism to determine the fixed-rates at which borrowers and lenders transact.
The mechanism works such that lenders submit offers to lend, and borrowers submit bids to borrow to the protocol. Once the auction is closed, the protocol determines a market clearing rate where all borrowers bidding at or above the clearing rate receive a loan, and all lenders offering at or below the clearing rate make a loan, each at the market clearing rate. All other bids and offers are said to be “left on the table.”
The platform, which is developed by a team with deep trad-fi, big tech and DeFi experience and backed by Electric Capital, Coinbase Ventures, Circle Ventures, Robot Ventures, and MEXC Ventures, allows collateral to be held on-chain in non-custodial smart contracts where assets can be verified in real-time and are safe from counterparty risk.
Term Finance offers a solution to the lending trilemma present in crypto lending markets, where participants are forced to make trade-offs between stability, scalability, and transparency. With the platform, borrowers can access liquidity on fixed terms without compromising on fees, slippage, custody or trust.
Fixed-rate lending has been a fundamental building block of modern finance, affording enterprises and households a modicum of certainty in an otherwise uncertain world. However, its presence in DeFi has been elusive. Existing platforms that utilize models relying on automated market makers (AMMs) suffer from significant slippage at scale while requiring large amounts of idle capital to operate, making it difficult for borrowers to borrow at scale without significant slippage and for LPs who support those mechanisms to earn subpar returns. Floating rate DeFi protocols, on the other hand, have managed to achieve scale within a trustless model but are not designed for fixed-rate and fixed-term lending.
Term Finance aims to achieve mass adoption and realize the vision of a transparent, equitable financial system. It leverages the virtues of DeFi without sacrificing on efficiency, capitalising on tried and true auction mechanisms that match borrowers and lenders. With Term Finance, users can enjoy transparent, scalable, and trustless access to liquidity on fixed terms.
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