- Sense Finance x Rari Capital
Following the recent announcement of Sense, we’re proud to announce our partnership with Rari Capital. With technical guidance from the Rari team, we’re building a permissive onboarding factory atop Fuse to permit Zero & Claim borrowing/lending upon launch of the Sense Protocol. Integration with a lending facility allows users to create unique borrowing & lending positions with their assets, and contribute to improved price discovery in Sense’s interest rate markets.
This post gives a refresher on Sense, introduces the integration, and describes its downstream effects. Let’s dive in.
The Sense Protocol will allow users to hedge interest rate volatility and trade future yields on existing yield-bearing assets.
To do this, Sense enables users to decompose yield-bearing assets into their principal and yield components and package them behind two fixed-term maturing assets, a Zero, and a Claim. At their maturity, the principal is returned to the Zero holders, whereas the Claim holders collect any yield accrued on the principal. In essence, the Zero holders are “lending” their principal to Claim holders to invest in the yield-generating activity that the yield-bearing asset represents. In turn, Claim holders pay a fixed interest rate upfront as a fee for the “loan” — in practice, this fixed interest rate is “paid” to Zero holders through a discount on the Zero market price.
From the Sense Protocol Litepaper, the following use cases exist:
- Fixed-rate lending — Buying Zeros and holding until maturity
Future yield trading — Buying Zeros/Claims to short/long its implied rate
The result is a simple yet powerful enhancement to yield-bearing assets. It allows two parties to exchange interest rate risk with the convenience of purchasing Zeros & Claims from the free market.
To some, purchasing Zeros & Claims is just the first step towards a more flexible capital management strategy. They’ll naturally want to use Zeros & Claims as money legos in other parts of DeFi via lending/borrowing or utilizing them as collateral.
Leveraging the permissive infrastructure of Fuse, the Sense Protocol will directly own a public Fuse pool for the borrowing/lending of all Zeros, Claims, and their associated yield-bearing assets.
The Sense’s Pool unlocks the following use cases:
- Borrow Zeros & Claims to short their implied rates
Earn extra yield by lending Zeros and Claims
Amplify exposure with Zero and Claim collateral
Leaning into Sense’s permissive design philosophy, the Sense Pool automatically onboards new Zeros and Claims upon series initialization.
The Sense Pool consolidates all markets in a single pool, so users can borrow one Zero/Claim against another Zero/Claim of a different yield-bearing asset, thereby generating a novel risk-return profile. As a result, they can leverage Fuse’s markets to profit from market inefficiencies or open complex hedges against unique exposures.
The downstream effects of permissive borrowing/lending are massive. Users can express their views on rates more precisely, and their actions directly contribute to superior price discovery and efficiency across the Sense ecosystem. Moreover, the passive participant can opt to lend and earn extra yield. It’s a win-win for everyone.
As Sense Protocol and the integration go through multiple audits ahead of launch, we see a significant opportunity for users to become more familiar with Sense’s features and supercharge their yield positions. Borrowing and lending Zeros & Claims is only just the beginning.
Over the coming weeks, we’ll be releasing new versions of the Sense Portal, announcing new features of the protocol, and inviting community members to join our upcoming private testnet. If you’re interested in joining the beta, please fill out this form.
If you are a part of the Rari or Sense communities and are interested in building atop this integration, please reach out on our social media channels below!
Rari Capital is a fully decentralized finance protocol that enables users to earn yield on their tokens. The Fuse protocol is a fully permissionless lending/borrowing system that allows anyone to create their own custom environments to earn and expand further on their crypto holdings.
Learn more about Rari Capital here: https://rari.capital
Sense Finance is an open-source software development company, building tools, products, and infrastructure for the DeFi ecosystem. It’s building the Sense Protocol, a decentralized fixed-income protocol on Ethereum.
Join our community on Discord as we prepare for our testnet launch, and follow us on Twitter for updates!
- Date of publication:
- Thu, 10/14/2021 - 09:45
Click on the link - it will be copied to clipboard