Coupon Finance Launches Innovative Peer-to-Pool Lending Protocol to Enhance Capital Efficiency in Lending Markets

Location, March 26, 2024 — In an effort to address inefficiencies within the decentralized finance (DeFi) lending space, Coupon Finance has unveiled its peer-to-pool lending protocol. This new platform aims to refine the balance between capital efficiency and user flexibility by integrating a novel approach to fixed-term, fixed-rate lending in a peer-to-pool context.

In the realm of DeFi, lending protocols traditionally fall into one of two categories: peer-to-pool, variable-rate lending, and fixed-term, fixed-rate lending. The former category, which includes notable platforms such as Aave and Compound, is prevalent due to its straightforward user experience and high degree of flexibility. These platforms allow users to engage in depositing, withdrawing, borrowing, and repaying at their discretion. However, this model often leads to a discrepancy between deposit rates and borrowing rates, known as the lending-deposit spread, due to its lower capital efficiency.

Fixed-term, fixed-rate lending protocols, represented by platforms like Yield Protocol and Term Finance, were developed to combat the issue of capital inefficiency by ensuring that loans are financed with term deposits, aligning borrowing and lending durations. Despite their effectiveness in enhancing capital efficiency, these protocols face challenges in adoption due to their inherent lack of flexibility.

Coupon Finance introduces a solution that bridges the gap between these two models by offering fixed-term, fixed-rate lending within a peer-to-pool framework. This unique approach ensures capital efficiency without compromising on flexibility for users. The protocol achieves this by utilizing a Certificate of Deposit with Coupons (CDC), an on-chain order book, and yield tokenization, thereby allowing for adaptable loan durations and the ability to redeem before maturity.

The innovation behind Coupon Finance lies in its ability to eliminate the term spread commonly seen in traditional lending protocols. By tokenizing interest rates and matching term lenders with borrowers in a peer-to-pool fashion, the platform tightens the lending deposit spread, offering more favorable rates for both parties. This not only improves upon the existing DeFi money market models but also introduces price discovery for interest rates without sacrificing utilization rates.

The peer-to-pool model employed by Coupon Finance represents a significant step forward in addressing the high lending-deposit spread issue plaguing current lending protocols. By financing term loans with term deposits and eliminating the term spread, Coupon Finance manages to maintain peer-to-pool fungibility, thus enhancing liquidity and providing users with greater flexibility in managing their positions. This approach is akin to practices in traditional finance but with added efficiency thanks to the programmable nature of DeFi.

Moreover, the platform opens up new opportunities within the interest rate markets by enabling the trading of yield tokens. This feature allows depositors to secure fixed yields while offering borrowers and traders the chance to speculate on DeFi interest rates, further contributing to the liquidity and dynamism of the platform.

About Coupon Finance

Coupon Finance is a pioneering DeFi platform offering a peer-to-pool lending protocol that combines the benefits of fixed-term, fixed-rate lending with the flexibility and capital efficiency of peer-to-pool models. Leveraging blockchain technology, Coupon Finance introduces an innovative approach to DeFi lending that addresses the challenges of term spread and liquidity, providing competitive rates and greater flexibility for both borrowers and lenders.