In a move that’s sure to pique the interest of crypto enthusiasts, the Solana-based crypto lending platform, Jet, is relaunching with fixed-rate loans. This is an interesting divergence from the majority of its competitors who still employ variable rate products. Jet’s unique order book design allows borrowers and lenders to set their own terms, including interest rates and payback timelines. Founder James Moreau highlights that this results in a market-based annualized percentage yield (APY), rather than an artificially derived one.
The fixed-rate approach is common practice in traditional finance channels, however, in the world of crypto, lending protocols tend to advertise fluctuating interest rates. This can lead to significant risks and rewards – skyrocketing profits on one hand, but a high likelihood of loss on the other. Moreau admits that Jet’s model faces resistance from big traders like market makers who may be used to the flexibility that variable-rate products offer, like being able to withdraw their money at any time (utilization rates permitting). Nevertheless, with fixed-rate loans, their crypto is locked in for the duration of the contract.
Despite the obvious reduction in risk, Jet has experienced a decline in its performance metrics alongside other Solana protocols. Their total value locked (TVL) has dropped from over $36 million in late 2021 to under $200,000 at present, according to DeFILlama. Moreau acknowledges that introducing fixed-rate lending products may not suffice in pushing a deluge of liquidity back into Solana, but he remains optimistic about its appeal to a particular niche – Decentralized Autonomous Organizations (DAOs) and on-chain corporations with sizeable, idle treasuries.
Another potential use case for Jet, according to Moreau, targets traders of staked SOL, specifically those involved in maximal extractable value (MEV) strategies. They can access easy money through the platform’s fixed-rate lending. Moreau’s goal, essentially, is to maximize the borrowing capacity of the lending pool. “We basically want to see as much of the lending money get borrowed as possible, and so that’s what I’m working on,” he says.
In conclusion, the relaunch of Jet with fixed-rate loans showcases an intriguing development for the crypto lending industry. Although it’s uncertain if this approach will significantly boost Solana’s liquidity levels, it’s an innovative solution worth watching for those operating in niche markets. As the crypto landscape evolves, challenging the status quo with fresh concepts such as fixed-rate loans may be the key to driving further advancements and success.
Source: Coindesk
