Auction Based Volume Matching

Term Finance is a noncustodial fixed-rate liquidity protocol modeled on tri-party repo arrangements common in traditional finance (TradFi). Liquidity suppliers and takers are matched through a unique weekly auction process where liquidity takers submit bids and suppliers submit offers to the protocol. These bids and offers are aggregated at the close of an auction to determine a "market clearing rate". Bidders who bid more than the clearing rate receive loans and lenders asking less than the clearing rate, supply. All other participants’ bids and offers are said to be “left on the table.”

Conservative Collateral Management

Collateral backing Term loans sit in isolated noncustodial smart contracts (each, a "repoLocker") throughout the term of a loan. These assets are ineligible for rehypothecation, ensuring they cannot be lent out to other borrowers. This approach not only prevents contagion risk between different collateral types but also significantly reduces risk for both lenders and borrowers.

Protocol Security

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