Illuminate Your Finances
Say good-bye to Gravel and hello to Illuminate!
Welcome to Illuminate!
I’ve decided to rebrand, rename, and rehost my project for Gitcoin Kernel Cohort II, with a continued focus on making fixed-rate loans more accessible for users.
Why Does Fixed Rate Lending Matter?
Most of the worlds debt is parked behind a fixed rate debt instrument. They provide stable cash flows to traditional financial markets. Also, fixed interest rates provide certainty and minimize risk for market participants.
Zero-Coupon Bonds:
This type of fixed-rated loan is my PoC financial instrument of choice. It allows users to lend their capital in return for a coupon that can be redeemed at maturity. The coupon does not pay interest but instead trades at a discount, providing a profit at maturity.
Yield:
Yield Protocol allows you to have a "set and forget" experience, instead of constantly rebalancing your assets across DeFi in an effort to minimize your borrow rates or maximize your lending yields. We accomplish that with a new primitive, fixed yield tokens, or fyTokens for short.
The Yield team was actually the first to publish a whitepaper on the concept of zero-coupon bonds in the DeFi space.
Notional:
Notional is a protocol on Ethereum that facilitates fixed-rate, fixed-term crypto asset lending and borrowing through a novel financial instrument called fCash.
The neat thing about Notional is that it allows trading of fCash, which opens opportunities for users to “move value back and forth through time.”
UMA:
UMA builds open-source infrastructure for … Priceless financial contract templates, which can be used to create synthetic tokens.
The UMA implementation allows users to lends their funds to mint yUSD of a given maturity, which is tradeable against USDC through a “traditional” AMM on Balancer.
HiFi (Mainframe):
Mainframe’s fixed-rate loans are just that, fixed. They have a fixed term, the interest rates will not change due to fluctuations in demand, and borrowers do not have to pay a premium.
Hifi, previously Mainframe, allows lenders to purchase the tokenized debt obligation (yTokens), typically at a discount, and redeem them for face value at maturity.
Progress:
For Kernel Expo Day, I was able to showcase my PoC v1 on the Kovan network, which successfully selected the best yield (based on the APY of two maturities: April and July 2021) between the Yield and Notional protocol.
With atomic transactions in mind, I decided to temporarily remove Notional’s protocol in this initial build for Kernel’s final Demo Day. In its place, I’ve decided to implement Swivel as another source of fixed-rate lending liquidity for my aggregator.
Great