@TermMax #TermMax
I kept assuming TermMax’s “fixed rate” worked like a normal lending market with the rate simply locked when you borrow.
The part I had overlooked is that the fixed cost is really coming from how its debt tokens trade.
A borrower creates Fixed-Rate Tokens against a collateralized position. Those tokens have a known value at maturity, but they can be sold for less than that value today. If an FT settles at $1 later and the market pays $0.80 for it now, the borrower gets $0.80 upfront and takes on a $1 repayment obligation.
That $0.20 difference is basically the borrowing cost.
What changed my view is that the rate isn’t just a number assigned by the protocol. It comes from the price someone is willing to pay for that future repayment.
That makes the structure more predictable for borrowers, but it also means liquidity becomes part of the rate itself. Thin demand can make funding expensive even when the final debt amount is already known.
I can see why the design makes sense: the market does the pricing instead of relying on a constantly shifting utilization curve.
But does that actually make fixed-rate DeFi cleaner, or does it simply hide the rate risk inside token liquidity?
I kept assuming TermMax’s “fixed rate” worked like a normal lending market with the rate simply locked when you borrow.
The part I had overlooked is that the fixed cost is really coming from how its debt tokens trade.
A borrower creates Fixed-Rate Tokens against a collateralized position. Those tokens have a known value at maturity, but they can be sold for less than that value today. If an FT settles at $1 later and the market pays $0.80 for it now, the borrower gets $0.80 upfront and takes on a $1 repayment obligation.
That $0.20 difference is basically the borrowing cost.
What changed my view is that the rate isn’t just a number assigned by the protocol. It comes from the price someone is willing to pay for that future repayment.
That makes the structure more predictable for borrowers, but it also means liquidity becomes part of the rate itself. Thin demand can make funding expensive even when the final debt amount is already known.
I can see why the design makes sense: the market does the pricing instead of relying on a constantly shifting utilization curve.
But does that actually make fixed-rate DeFi cleaner, or does it simply hide the rate risk inside token liquidity?