Term Structure, a decentralized finance (DeFi) platform, has launched its mainnet with the goal of revolutionizing risk and liquidity management in the industry. This marks an important milestone in the integration of traditional finance mechanisms into the world of DeFi, enabled by blockchain technology.
The concept of banking dates back to 1472 in Italy, when the first bank was established to facilitate commerce, secure deposits, and provide loans. These early banking activities laid the foundation for the development of more complex fixed-income instruments. In the 17th century, the issuance of government bonds by the Bank of England for military financing marked a significant development in the fixed-income market.
Over the years, the fixed-income market has grown, with the introduction of corporate bonds during the Industrial Revolution. Fixed income has become a fundamental pillar of the global financial system, offering governments and corporations a stable method of financing while providing investors with predictable returns.
However, despite the growth of DeFi in 2020, there are currently no fixed-income markets in the decentralized finance space. Term Structure Protocol aims to fill this gap by offering a peer-to-peer fixed-income protocol. This protocol introduces primary markets for lending and borrowing at fixed terms and rates through auctions, as well as secondary markets for trading fixed-income tokens through order books. It also utilizes innovative tools like zkTrue-up, a customized ZK-rollup, to ensure data availability, eliminate gas fees, and allow users to withdraw their assets without permission.
One of the main challenges for DeFi to achieve exponential growth is the difficulty in securing a fixed cost of funds, which is essential for leveraging higher floating annual percentage yields (APYs) or capitalizing on token price appreciation. Term Structure addresses this challenge by offering peer-to-peer fixed-rate and fixed-term lending and borrowing, similar to sophisticated trading platforms like dYdX v3. This allows users to manage their risks and tailor their investment strategies according to their preferences.
Unlike other protocols that use automated market makers (AMMs), Term Structure offers a market-driven, unified fixed-income market where users can choose from eight mainstream collateral tokens for borrowing or lending. Users can select from various fixed tenures and specify their preferred interest rates and amounts. Borrowers receive the borrowed tokens and are obligated to repay their loans by the maturity date to retrieve their collateral, while lenders receive Term Structure fixed-income tokens that can be redeemed for principal plus interest at maturity.
The protocol has achieved significant milestones prior to its mainnet launch, including securing initial funding of $4.45 million in seed fundraising rounds and launching its testnet. Rigorous audits have also been conducted to ensure the security of the smart contracts and ZK circuits.
Term Structure plans to introduce new features and tools, such as trading APIs, layer 2 swaps, and debt buy-back. It will also support other yield-bearing tokens as collateral, implement collateralized financing with real-world asset (RWA) tokens, and develop DeFi forwards and term futures.
The co-founder of Term Structure, Jerry Li, emphasizes the importance of blockchain technology in solving practical issues and improving financial openness. The aim of Term Structure is to make blockchain technology as understandable and impactful as the internet, ultimately becoming an indispensable part of daily life for users worldwide.
By providing a fair and transparent trading environment, Term Structure aims to address significant challenges in DeFi, such as securing fixed costs of funds for effective risk management and financial planning. The integration of traditional finance elements with blockchain innovations is a step towards maturing the DeFi space and making it more accessible and reliable for users.