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.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

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 (1).png

Research

Aave’s revenues have doubled from April lows and are fast approaching all-time highs. With 35% of borrow interest coming from ETH and 55% from stablecoins, Aave is emerging as a powerful proxy as an ETH and stablecoin beta. As looping strategies accelerate growth and Horizon positions the protocol to ride the RWA wave, Aave is shaping up as one of DeFi’s most compelling multi-narrative plays.

article-image

Private testnet aims to deliver low-cost settlement with partners including Visa, Deutsche Bank, and OpenAI

by Blockworks /
article-image

Solana saw $78 million in REV for August

article-image

Lit Protocol’s Vincent is shifting agentic finance from toy demos to production rails

article-image

The new system aims to unify Europe’s fragmented tokenized asset settlement and cut cross-border costs

by Blockworks /
article-image

Tron slashed fees by 60% as Plasma looms, threatening its USDT moat

article-image

The acquisition adds evaluation-based funding to Kraken Pro, giving traders access to capital on performance

by Blockworks /