Fixed Income DeFi Platform Term Finance Readies for Business

Term Finance, a decentralized finance (DeFi) protocol for fixed interest borrowing, is preparing to go live around the end of March, and is looking to reassure institutional investors in the wake of last year’s crypto scandals.

Term Labs, the platform's builder, raised $2.5 million in a seed round led by Electric Capital with participation from Coinbase Ventures, Circle Ventures, Robot Ventures and MEXC Ventures. There was also angel investment from the founders of DeFi stalwarts Aura, Balancer, Hashlow and Llama.

Centralized lending operations blew up last year, but the DeFi sector, where funds are transparently locked in tamper-proof digital contracts, remained largely intact. While decentralized lending has mostly been confined to over-collateralized, crypto-backed loans with variable rates, some participants now see opportunity in bringing fixed-rate lending and interest-rate derivatives to DeFi.

“If you think about traditional finance, short-term borrowing and lending, fully over-collateralized, typically backed by Treasurys or mortgage-backed securities is the lubricant of the entire financial market,” Term Labs CEO Dion Chu said in an interview. “We’re trying to create the same money market for the DeFi space. The goal is a sort of benchmark yield curve for the DeFi space, which currently doesn’t exist.”

In addition, Term Labs’ auction model originates loans at scale without slippage, bid-offer spread or other hidden transaction costs seen in other lending protocols, said Electric Capital partner Ken Deeter in a statement.