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

Unlocked by Template (10).png

Research

Innovations on Aptos’ technical design through Raptr, Shardines, and Zaptos approach near-optimal latency and throughput by unlocking 100% utilization of network resources, with the capacity to settle 260k transactions per second with latencies less than 800ms. The original Move language was revamped with the launch of Move 2, supporting more expressivity in smart contract logic and a scalable ability to interact with high volume datasets. The ecosystem has benefitted from strong asset inflows, now hosting over $1.3B in stablecoins, $450M in bridged BTC, and $530M in RWAs. Activity in the Aptos ecosystem has grown notably over the past year, with monthly application revenue reaching ~$835k and monthly DEX volumes growing to over $5B, both at new all time highs.

article-image

The Stripe-acquired firm has big plans for a streamlined, multi-wallet future

article-image

Both founders of the former crypto lender have now landed in new crypto industry roles

article-image

Bitcoin’s recent peak is a victory lap for curvers left and right

article-image

Securitize CEO Carlos Domingo says institutions are eager to get exposure to tokenization

article-image

Trade isn’t war and prosperity isn’t a contest