The Yield Protocol — which enables fixed-rate lending on Ethereum — is live


The Yield Protocol, an Ethereum-based platform aimed at decentralized fixed-rate lending and borrowing, is up and running on the Ethereum mainnet.

The protocol, which was incubated by crypto investment firm Paradigm, is still in beta testing but is “fully functional,” according to a blog post by Allan Niemerg, founder of Yield, the startup behind the technology.

At the heart of the system is what Niemerg called a “new core DeFi primitive,” called fyDai (fixed yield Dai). These ERC20 tokens are analogous to so-called zero-coupon bonds in traditional finance, which are debt instruments that don’t pay interest. Instead, they trade at a discount until they mature, at which point they can be redeemed for full face value. This capability opens the door to a crypto version of fixed-rate lending.

Popular decentralized lending platforms like Maker and Compound charge borrowers a floating rate. Fixed-rate loans are designed to make it easier for borrowers to plan for the future. 

Yield is open for business to users who want to start by “pooling Dai in the automated liquidity provider,” by which they can earn trading fees and interest, according to Niemerg. They can also borrow Dai at fixed rates with ETH collateral or lend Dai at fixed rates, in quarterly maturities through December 2021.

The team plans to move out of the beta testing phase in early November, Niemerg said in the blog post. The smart contracts underlying the system have been audited, he said, but warned users to keep in mind that it is still beta testing. 

“We expect that there will be unexpected emergent behavior as a result of people using Yield in novel ways, and we do not have the ability to control or prevent users from using the smart contracts as they please,” he said.

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With more than $100 billion in market cap across all chains, it is likely that the DeFi market cap will grow to $200 billion by 2025. However, many users still face various technical barriers when using decentralised platforms to do on-chain farming, staking and trading, while off-chain solutions face liquidity issues, fiat restrictions and the lack of a central multichain to support crypto assets and institutional-grade custodians. 
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