Fixed-Rate Products May Become Institutional Pipeline to DeFi


HONG KONG, May 31, 2022 /PRNewswire/ — Huobi Research Institute, in conjunction with Huobi Technology and EmergentX, released the research report “The Haven of Bear Market: fixed-rate DeFi protocol”. The report provides an exhaustive classification study of existing DeFi fixed-rate products and explores the future development direction. Flora Li, Director of Huobi Research Institute, said that fixed-rate products can mitigate market risk, and fixed-rate products will receive extra attention during market downturns.

The report shows that DeFi fixed-rate products can be classified into 3 categories: zero-coupon bond, separated principal and interest, junior and senior bond. The representative example of the zero-coupon bond is Notional Finance, which currently offers a lending rate of about 4.9%. The separated principal and interest is represented by Element and Pendle. Take Pendle as an example, the annual percentage rate (APR) of stablecoins is only 1.5%-1.8%. The junior and senior bond is also represented by projects, but none of them has a high total value locked (TVL) position.

The report analyzes that the fixed rate is relatively low, whether it is a zero-coupon bond or separated principal and interest, or junior and senior bond. Stablecoin interest rates of major lending protocols in the DeFi market such as AAVE and Compound fluctuate in the range of 5-7%, and their risk control measures have passed the market test and keep relatively robust returns. Although fixed-rate protocol can lock in future interest rates, there is currently a large gap in pricing with mainstream floating-rate protocol, and the TVL of each fixed-rate protocol is currently at a low level.

The report suggests that DeFi fixed-rate products could integrate more lending protocols to address the low fixed rate issue. It also explores the possibility of combining DeFi fixed-rate products with NFT. Flora said that there is a great demand in the fixed-rate market, especially in the future when the market may face more institutional level users. We look forward to more innovative and relevant products from DeFi.

Huobi Research Institute is committed to continuous research and exploration of all areas of blockchain. Its goal is to accelerate the research and development of blockchain technology, promote the overall application of the blockchain industry, and advocate the ecological optimization of the blockchain industry. The research direction of Huobi Research Institute includes industry trends, technology path, application innovation in the blockchain field, model exploration, etc.

Huobi Technology Holdings Limited (“Huobi Tech”, Stock Code: 1611.HK) was listed on the Main Board of the Stock Exchange of Hong Kong Limited in November 2016. Actively developing the blockchain ecosystem and virtual asset ecosystem, Huobi Tech is committed to becoming the leading one-stop compliant virtual asset service platform. Huobi Tech currently offers data center services, cloud-based services, SaaS, virtual asset management, custody, trust, lending, OTC, exchange platform services.

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