Out of the many sectors of the ever-growing DeFi ecosystem, lending has long been known as the most popular both by Total Value Locked and my active users. With protocols like Compound and dYdX paving the way for users to earn passive interest on stablecoins like Dai and USDC, it’s no surprise that historic lending rates as high as 10% have attracted many users to DeFi’s first major use-case.

However, it’s definitely worth noting that virtually all of the major lending protocols are variable, meaning that the interest rate displayed today can quickly change tomorrow. This was best exemplified by Maker and the Dai Savings Rate, in which the rate dropped from 8% to the current rate of 0%.

What this goes to say is that there’s a huge gap for fixed lending – namely in which users are able to lock in collateral for a fixed period of time in exchange for a fixed return.

This past week, we sat down with Blazar – the winners of ETHLondon – as we discussed the need for fixed lending and their proposed solution.

Since then, we saw the launch of DeFi Money Market – a product which offers users a fixed return on ETH using real-world assets.

Yesterday, we saw the mainnet launch of 88mph, a sleek fixed lending application filling the gap by offering users interest up-front right now!

Why Fixed Lending?

Largely speaking, fixed lending *should* provide peace of mind to those worried about the ever-changing rates of the existing lending protocols.

As a new user, we can theorize that someone would be more comfortable knowing how long they are committing to supply capital, along with a clear understanding of what they’re getting back in return. Similarly, fixed lending drastically outsizes the variable lending market, suggesting a strong potential for DeFi growth if executed properly.

As it stands today, perhaps the only notable DeFi protocol offering fixed borrowing is Aave – namely through their Stable APR.

 

Seeing as many centralized providers like BlockFi and Gemini are attuned with offering fixed, it’s interesting to consider protocols which can mitigate trust through the use of smart contracts.

Unique Approaches

One of the more novel aspects of this new suite of fixed lending protocols is the different elements being used to compensate lenders.

In the case of Blazar, the protocol is experimenting with “future Tokens” (also known as fTokens) which are given to the lender when locking their capital. These tokens can be exchanged for the underlying collateral at any point, although they may have to pay back some of their up-front interest if doing so prior to maturity.

With 88Mph, users are immediately paid in Dai, less a 10% service fee which allows the product to become profitable virtually from day one.

Lastly, with DMM, users are allocated mTokens, representing their claim on collateral at the price it was deposited at.

All this goes to say that with a suite of different token flavors, we’re currently experiencing a race to adoption. If one thing is for sure, the team which can deliver the most compelling product at the lowest cost to users is likely to gain the most traction within the DeFi ecosystem.

With that being said, let projects like Dharma serve as a reminder that the DeFi sector is not the whole pie, and there lies endless amounts of opportunity to tap into legacy markets through attractive savings rates.

What to Expect

In the coming weeks, we expect many of these protocols to either go live or open their platform to early testers.

As a user, we recommend proceeding with caution as some of the aforementioned contracts (namely 88mph) are currently unaudited.

Please let iEarn serve as an example of early experiments coming with a larger degree of risk. But, for those willing to take that risk, it’s likely that your usage will help influence the fixed lending primitives of tomorrow!

 

To stay up with the projects mentioned above follow then on Twitter here:

Until then, we’re excited to keep a close eye on this growing sub-sector in the coming months!