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Jet - Innovating Crypto Lending with Fixed-Rate Loans

By: illustrious
June 23, 2023 1:32 PM EDT
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Solana-based cryptocurrency lending platform Jet is breaking the mold by introducing fixed-rate loans, marking a departure from the largely variable-rate products offered by most crypto competitors. This bold new approach aims to bring a level of certainty and stability that mirrors traditional finance, offering borrowers and lenders a degree of predictability that has been sorely lacking in the volatile world of crypto.

Jet's unique order book model enables borrowers and lenders to establish their own terms, setting interest rates and defining repayment schedules according to their personal financial strategies. According to Jet's founder James Moreau, this isn't about an "artificially derived APY (annualized percentage yield)," but rather it is a "market-based" approach, reflecting the actual conditions and dynamics of the market.

While this is standard practice in traditional finance, the crypto sphere has largely adopted a different model, with lending protocols offering fluctuating interest rates that can spike dramatically or plummet within the course of a day. This can potentially be profitable for those willing to shoulder a significant level of risk, but the downside is stark – there's a good chance you could also lose.

The introduction of fixed-rate loans by Jet is not without its challenges, however. Moreau acknowledges that the platform’s model may meet resistance from large traders like market makers who have become accustomed to the flexibility of variable-rate products. These products allow them to withdraw their capital whenever they wish, assuming the utilization rate is not excessively high. On the other hand, a fixed-rate product requires their crypto assets to be locked for the duration of the contract.

Jet's journey so far has been a rollercoaster ride. Like most Solana protocols, its performance metrics have experienced significant drops since the highs of late 2021. At its peak, the protocol reportedly had over $36 million in total value locked, according to DeFiLlama, but currently, it stands under $200,000.

Despite this, Moreau remains optimistic. He concedes that it's unlikely fixed-rate lending will drive a liquidity surge back to Solana, but he believes Jet's product can attract DAOs (Decentralized Autonomous Organizations) and other on-chain entities possessing large, idle treasuries which can be invested and put to use.

Moreau also pointed out that traders of staked Solana (SOL) could benefit greatly from Jet’s new offering. These traders could utilize Jet's platform to secure funding with relative ease, making it an attractive option for those employing maximal extractable value (MEV) strategies or staking SOL.

"We basically want to see as much of the lending money get borrowed as possible, and so that's what I'm working on," Moreau explained. This statement encapsulates Jet's mission to foster an efficient and equitable lending market in the crypto sphere, shaking up the status quo with its innovative fixed-rate lending model.

Always experimenting.

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