Introducing Size Credit
We've launched! Explore the fixed-rate lending market with unified liquidity on Base today...
We're excited to announce that Size Credit has launched on Base to bring fixed-rate lending for any maturity to DeFi for the first time.
To date in DeFi, we have only seen product market fit among pool-based, variable rate lending protocols.
A few pool-based fixed-rate models have been launched with limited success, suffering from fragmented liquidity across dedicated AMMs for each maturity.
This leads not only to high slippage, but also a poor user experience — borrowers and lenders are forced to pick maturities that don't line up with their preferred time horizons.
Size Credit presents an order book model where offers are expressed like yield curves, allowing efficient pricing of fixed rate products while maintaining unified liquidity across the full maturity spectrum.
This results in some exciting new use cases, like interest rate speculation for any date or time in the future, trading of credit, patient borrow bids, and immediate fixed rate lock-in via buying credit as a market order.
How it Works
Buying Credit (Lending)
The Size marketplace uses credit terminology. In case you’re not familiar with fixed rate products, you can use the following interchangeably:
Buying Credit = Lending
Selling Credit = Borrowing
Buying Credit via Limit Orders
Lenders deposit USDC, which is pushed into Aave to ensure that users are earning the market variable rate while not yet matched with a fixed-rate borrower. At the same time, the lender creates a yield curve offer specifying the rate that they would like to receive across different maturities.
For example, a lender may specify a continuous curve defined by the points (1 month, 2.5%), (3 months, 3%), and (1 year, 5%). If a borrower then wanted to borrow for 4 months, they would pay ~3.2% if matched with this lender.
Lenders may exit early (sell their credit) if desired by exiting to other willing lenders through the order book.
Buying Credit via Market Orders
The Size order book allows for users to also buy credit as a market order. The user simply inputs a maturity (any date or time they want) to immediately start earning the best rate available.
This is the first time any product like this exists in DeFi!
Selling Credit (Borrowing)
Selling Credit via Market Orders
Borrowers simply pick the amount they would like to borrow, the amount of collateral they would like to deposit (which determines their collateralization ratio), and a due date for their loan.
They are then matched with the lowest fixed rate for that chosen maturity.
Large sized loans may span multiple lender offers and liquidity will be automatically aggregated with a weighted average rate.
Borrowers may take multiple loans and only need to maintain one collateralization ratio across all of their loans. Collateral may be added or withdrawn, permitted the minimum collateralization ratio thresholds are not exceeded.
Selling Credit via Limit Orders
Borrowers may also opt to borrow via a limit order, in which case they submit an bid as a yield curve and deposit some collateral. For example, I may be interested in borrowing between 6 to 12 months for 2 to 3% respectively. If a market order to buy credit is submitted, or another borrower is liquidated, and my offer is the best on the order book, my bid to borrow will be filled.
Complex Credit Strategies
In addition to the above, the credit order book can be used to conduct more complex credit operations. For example, bids to borrow also double as offers to sell credit, and can be used to structure active or passive credit dealing strategies!
We’ll post more on this subject soon, or you can get ahead by reading the Size docs.
Get Started on Size 🐋
Ready to be first to test Size Credit live on Base? Click below to launch the app!