# Fixed-Rate Lending

## Fixed-income Markets are the SPINE of Any Economy

Fixed-income markets are HUGE and an integral part of the global economy. In the "real world," fixed-income markets are currently **three times** larger than stock markets.

Fixed-rate lending is a fundamental component for enabling more complex financial products, such as interest rate swaps and derivatives, which account for over **80%** of the world's total derivatives volume.&#x20;

### Fixed-Interest-Rate Products on DeFi

For DeFi, despite currently (as of June 2024) accounting for only around **2.5%** of the total DeFi market's total value locked (TVL), the DeFi fixed-rate market has seen a remarkable **5,000% growth** over the past year, spearheaded by the phenomenal growth of Pendle Finance, indicating growing demand and a high potential.

Currently, variable-rate lending protocols are still the vast disparity between the top variable-rate lending protocols (such as Aave, Compound, or Morpho), with a combined TVL of around **$17+ billion**, and the top three fixed-rate protocols (Notional, Pendle, Yield), with a combined TVL of only around **$6 billion.**&#x20;

### Fixed-Rate Lending AND Borrowing

However, even with $6 billion in TVL, most of fixed-rate TVL are in the form of yield products (similar to the lending components), while heavily lacking on the borrowing side, with limited (<20m) products available.&#x20;

Spine believes this is a big gap in the market, as, similar to the real world, fixed-rate products would be a key component for enabling more complex financial products, such as interest rate swaps and derivatives. We believe our product is poised to fill this gap in the market, as we will provide fixed-rate on both the lending and the borrowing side.

## The Need for On-chain Fixed-Interest-Rate Products:

By providing predictability and good risk management, fixed-rate lending protocols could enable borrowers and lenders to transact with tr with huge benefits in transparency and scalability. As the DeFi ecosystem becomes more developed over time, fixed-rate lending protocols are well-positioned to become an indispensable part of the DeFi economy, offering an alternative to variable-rate lending and catering to the needs of institutions and users seeking predictability and well-designed risk management platforms.

### Assurance for Financial Predictability

One of the primary benefits of fixed-rate lending protocols is the predictability they offer to users. By locking in a fixed interest rate, borrowers can accurately forecast their payments over the entire loan tenure. Lenders also benefit from the ability to calculate their yield earn, enabling them to plan investment strategies with certainty.  &#x20;

Equally important, the predictable interest rates facilitate trading procedures for users. Having rates locked in, users do not need to constantly monitor and adjust for fluctuating interest rates. With just a crypto wallet and internet access, any user in the world can access competitive interest rates and secure their financial investment in one click without multiple steps of verification.

### Leverage to Comprehensive Financial Services

Fixed-rate lending protocols spark the development of financial instruments within the DeFi ecosystem. By providing predictable interest rates, these protocols facilitate the creation of interest rate derivatives. Users can leverage these derivatives to hedge interest-rate risks, unlocking crucial risk management capabilities.&#x20;

Additionally, fixed-rate lending protocols are foundational components for expanding financial services, serving more investment needs. By establishing predictable interest rates, these protocols create a trading flow that enables other DeFi aspects such as yield-bearing and swapping. This will provide seamless accessibility to a certain efficient yield earned with minimal risks.
