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Introduction

Tenor Protocol​

Tenor is a non-custodial, self-executing, fixed rate lending and borrowing protocol implemented for the Ethereum Virtual Machine. The protocol offers a simple template to create fixed rate markets using pre-existing Morpho money markets as their reference, making market creation simple. The protocol also uses Morpho as its settlement layer after maturity.

The protocol enables market curators to deploy fixed interest rate pools. These pools enable the efficient matching of lenders and borrowers at fixed interest rates for set periods of time using a bulletin board, order book-like system.

The protocol also implements an aggregation layer between pools to unify liquidity. This layer improves the protocol's capital efficiency, while simplifying the loan management process for lenders and borrowers.

Features​

  • Permissionless Market Creation: The Tenor protocol enables permissionless fixed rate market creation conditional to the existence of a reference money market on Morpho. Market creators can use the protocol as a template to create customizable fixed rate markets.
  • Efficient Matching: Lenders and borrowers can get matched at specific fixed interest rates using limit orders, improving the matching efficiency compared to traditional money markets. Limit orders offer a simple and efficient matching mechanism to enable peer-to-peer transactions between lenders and borrowers, allowing them to lock a fixed rate until maturity.
  • Fixed Rates: Borrowers and lenders benefit from the certainty of known rates for a set duration when borrowing or lending using markets created on the Tenor protocol. For borrowers, the ability to borrow at fixed rates mitigates the need to unwind positions contrary to money markets where rates update block to block.
  • Noncustodial: The Tenor protocol is noncustodial by design; users interact directly with the protocol's smart contracts.
  • Governance Minimized: Tenor fixed rate market parameters are immutable thereby avoiding the need for any type of active governance.
  • Re-aggregation of Liquidity: Fixed-rate markets can face liquidity fragmentation issues due to the creation of individual pools for each maturity. To address this, the protocol implements a liquidity aggregation layer, allowing lenders to simultaneously place limit orders across pools of different maturities. These limit orders can be executed by third parties on behalf of the lenders, provided that the realized interest rate meets or exceeds the lender-specified minimum, and the maturity aligns with the lender’s preferences. This mechanism helps re-aggregate liquidity across pools, reduces fragmentation, and provides lenders with a passive auto-rolling lending mechanism.

Tenor Interface​

Users can interact with the Tenor protocol contracts by interfacing directly with the EVM. While Tenor hosts a flagship interface, multiple interface can exist. Anyone can host an interface allowing users to connect their wallet to the Tenor protocol's contracts.