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Term Finance (TERM): Innovative Fixed-Term Auction Mechanism Redefining DeFi's Fixed-Rate Lending Paradigm
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Term Finance is a fixed-rate lending protocol based on the Ethereum blockchain, designed to provide transparent, secure, and efficient fixed-rate lending services through a scheduled auction mechanism.
1.Project Background
Traditional decentralized finance (DeFi) lending platforms such as Maker, Compound, and Aave primarily adopt floating interest rate models, where borrowing rates fluctuate based on market supply and demand. This volatility can create uncertainty in borrowing costs, making financial planning challenging for users. In response, the market has seen a rise in fixed-rate lending protocols, in which Term Finance has emerged as a prominent example among them.
2.Project Overview
Term Finance is a non-custodial, scalable fixed-rate lending protocol that leverages a unique auction model to support fixed-rate and fixed-term lending at scale. Users can access liquidity at a fixed interest cost without compromising on fees, slippage, custody, or trust.
Like existing DeFi lending protocols, Term Finance stores collateral in on-chain, non-custodial smart contracts. Assets are verifiable in real time and are not subject to counterparty risk. What sets Term Finance apart from other DeFi lending platforms is its innovative use of on-chain scheduled auctions (or double-auctions) to determine fixed interest rates for transactions between borrowers and lenders. Lenders submit offers to lend, while borrowers place bids to borrow. At the end of the auction, the protocol determines a market clearing rate. All borrowers bidding at or above the clearing rate receive loans, and all lenders bidding at or below the clearing rate lend at that rate. Because the scheduled auction settles at a single market clearing rate, Term Finance avoids the wide interest rate spreads commonly seen in traditional DeFi lending protocols.
3.Core Features
- Fixed Interest Rates and Terms: Term Finance establishes lending rates through scheduled auctions, ensuring both borrowers and lenders enjoy predictable rates over a fixed term, eliminating the uncertainty associated with floating interest rates.
- Scheduled Auction Mechanism: Term Finance's auction process consists of three phases: the announcement date, the auction window, and the reveal period. One week before the auction begins, details such as collateral types, loan assets, and other auction parameters are announced. During the auction window, both borrowers and lenders submit encrypted bids using a hash algorithm to enable sealed bidding prior to rate settlement. In the reveal phase, all bids are disclosed on-chain, and the final clearing rate is determined by an on-chain algorithm. This algorithm is designed to find the equilibrium point between supply and demand, maximizing the total loan volume.
- Tri-Party Repurchase Model: Borrowers must provide sufficient collateral before borrowing. This collateral is managed by smart contracts and remains locked throughout the loan term, ensuring borrowers remain accountable.
4.Operating Mechanism
- Borrowing Process: Borrowers submit loan requests specifying the desired amount, term, and maximum acceptable interest rate. Liquidity providers submit offers including the amount they're willing to lend and their minimum acceptable interest rate. At the end of the auction, the system determines a market clearing rate and matches borrowers and lenders accordingly. Borrowers must provide sufficient collateral, which is managed by smart contracts. Loans must be repaid at the end of the term or the collateral will be liquidated.
- Lending Process: Lenders deposit funds and specify their minimum acceptable interest rate. During the auction, their funds are matched with eligible borrowers. Once a loan is successfully matched, the lender will receive both principal and interest upon maturity.
- Liquidation Mechanism: If the borrower fails to repay the loan at maturity, the smart contract automatically initiates liquidation. The borrower's collateral is liquidated to compensate the lender for any losses. The liquidation process is transparent and carried out according to predefined rules.
5.How to Buy on MEXC
As a globally recognized cryptocurrency trading platform, MEXC has earned the trust and support of investors with its wide selection of trading pairs, efficient trading experience, and high-quality services. On MEXC, investors can conveniently trade the TERM token while enjoying a secure and seamless trading environment.
Here’s how to trade
TERM/USDT0.4591-0.41%
on the MEXC App:Step 1: Log in to the MEXC App and tap on Trade
Step 2: Select Spot Trading, then tap the trading pair box and search for TERM/USDT
Step 3: Tap Buy TERM
Term Finance, through its innovative fixed-rate lending model, delivers a secure, efficient, and user-friendly trading experience by leveraging multi-chain deployment, modular design, an efficient clearing engine, and risk isolation mechanisms. It provides DeFi with a more stable financial tool. As the DeFi market continues to evolve, Term Finance is poised to become one of the leading platforms for fixed-rate lending, offering users reliable and efficient borrowing and lending services.
Disclaimer: This material does not provide investment, tax, legal, financial, accounting, consulting, or any other related advice, nor does it constitute a recommendation to buy, sell, or hold any asset. MEXC Learn offers this information for reference purposes only and does not constitute investment advice. Please ensure you fully understand the risks involved and invest cautiously. All investment actions are the sole responsibility of the user and have no relation to this platform.