Term Finance brings fixed-term lending protocol to Ethereum mainnet

The first auction will start at 11 am ET on Tuesday, Aug. 1 and close after 48 hours

article-image

LightField Studios/Shutterstock modified by Blockworks

share

Fixed-term lending protocol Term Finance is slated to launch on the Ethereum mainnet today.

The protocol enables non-custodial, fixed-rate lending with collateral using the tri-party repurchase, or repo, model commonly used in traditional banking.

Tri-party repo is a repurchase transaction involving three parties. In TradFi, security dealers will find short-term repos to manage both their own assets and their client’s assets. In the case of Term Finance, the security dealer will be replaced by smart contracts.

Billy Welch, the co-founder of Term Labs, the team behind Term Finance, told Blockworks its ability to scale fixed-term lending sets it apart from other fixed-term lending protocols.

Many existing fixed-term lending protocols today utilize automated market makers and liquidity pools to originate fixed-term loans.

“From a borrower’s perspective, when you’re trying to borrow (for example) $500,000, $1 million, $2 million, there is significant slippage,” Welch said. “It’s not scalable for an institutional level user, then from [a liquidity provider] or lender’s perspective, you only make returns as borrowers interact against that pool. So your real returns are half a percent per year.”

Term Finance, on the other hand, uses a double-sided blind auction process where the protocol matches borrowers and lenders depending on how much they are willing to bid, Welch said.

“We conduct these auctions where borrowers and lenders can submit their bids and offers to borrow and lend over a period of time, and once the auction closes, we take the bids and offers and create a supply-demand curve,” Welch said. “Any borrower that’s willing to bid at or above the clearing rate gets a loan, and any lender willing to receive the clearing rate or less makes a loan.”

With this model, liquidity providers will not have to trap their liquidity in an automated market maker for an indefinite amount of time.

“All you have to do is lock it up for the period of when you submit your bid, if you get done in an auction you get a loan, and if you don’t you can take your tokens back and send it to another DeFi lending protocol and get variable rate lending in that capacity,” Welch said.

The first public auction on Ethereum mainnet will be a one-month loan maturing Aug. 31 on wstETH collateral borrowing USDC. The auction will begin at 11 am ET today, and interested participants will have 48 hours before Thursday at 11 am ET to place their bids.

“The long-term vision is we have a repo token maturing every week, every month, going out to one year. This can serve as a basis for a DeFi native benchmark yield curve,” Welch said.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (2).png

Research

This reports analyzes the competitive dynamics of the Solana DEX landscape, identifying sustainable moats per protocol. We also find that Raydium (RAY), Orca (ORCA), and Lifinity (LFNTY) are valued very similarly on a P/S basis and what this could mean for Meteroa's (MET) valuation, which is still pre-TGE.

article-image

The Drop’s Kate Irwin explains why OpenSea’s OS2 and SEA token are “exciting”

article-image

CoinShares’ CEO noted a “significant perception gap between regulatory approval, client demand and advisers’ fiduciary concerns”

article-image

“If we were to be successful, we would be on par with the Teslas and the DeepMinds of the world,” Frodobots’ co-founder said

article-image

It appears Trump’s team is trying to avoid having too many cooks in the kitchen

article-image

A lot has changed in the six months since the Fed decided to cut rates

article-image

Vitalik Buterin catches flack with pro-communism joke