Fixed-rate yield refers to a predetermined return on an investment that remains constant over a specified duration. This offers investors predictability regarding their earnings, regardless of market fluctuations. It contrasts with variable yields, which can change based on underlying market conditions.
Context
Within decentralized finance, fixed-rate yield products are gaining popularity as users seek more predictable returns amidst market volatility. These offerings often involve lending protocols that lock in interest rates for borrowers and lenders. The stability provided by fixed rates helps attract a broader range of participants to DeFi, balancing risk within the ecosystem.
The volatility tranching model abstracts risk, transforming staked collateral yield into a subsidy for fee-free leveraged trading, optimizing capital efficiency.
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