IPOR Labs AG, developers of blockchain-based derivatives software, announced today the launch of its IPOR (Inter-Protocol Overblock Rate) Protocol, which includes the IPOR Index, a standardized benchmark rate based on actual smart contract transactions, and the IPOR Interest Rate Derivatives DEX, allowing traders to hedge, arbitrage, or take a directional position on the interest rate movements to manage risk across their credit portfolios on Ethereum.
Taking a cue from traditional finance, IPOR is bringing tried and true fundamentals of the $450 trillion interest rate derivatives market to form the base layer of the DeFi credit markets. IPOR Labs AG, the firm that is developing the IPOR Protocol, was founded by crypto and TradFi market veterans. With three PhDs, quants with over 20 years in fixed income, enterprise software developers with 15 years in banking, payments, and insurance, IPOR Labs combines deep traditional and crypto finance to build the future of decentralized finance (DeFi). IPOR Labs is led by CEO Darren Camas, who has more than 11 years of experience building in crypto markets across exchange, payments, layer ones, and token infrastructure.
“In turbulent market conditions amid increasing interest rates, risk management comes to the forefront for investors, particularly in the credit markets,” said IPOR Labs AG CEO Darren Camas. “Where CeFi becomes the villain, DeFi has taken a hero role, particularly in the credit markets where major platforms have functioned flawlessly during the market downturn. We’re looking to offer a public good with the IPOR Index that offers a fully transparent and auditable benchmark rate and interest rate derivatives to manage risk. While the industry recoils, investors want to know how to assess and manage risks across portfolios.”
The IPOR Protocol consists of two parts:
- The IPOR (Inter-Protocol Overblock Rate) Index, a LIBOR-like benchmark interest rate sourced directly from DeFi smart contracts, is the core of the protocol. Unlike the LIBOR which was discontinued due to manipulation by traders inside banks, the IPOR Index is based on transparent, auditable, and real-time smart contract interactions, leveraging the very fundamentals of blockchain technology for a trustless benchmark rate. The IPOR Index is referred to as “The Heartbeat of DeFi” as it tracks the beating heart of the credit market.
The IPOR Index is published on-chain as a public good via a bespoke oracle where protocol builders and contracts can reference the IPOR Index rates as the base for new credit markets, lending agreements, derivatives, and other structured products.
- The IPOR Interest Rate Derivatives Decentralized Exchange (DEX) – The first derivative instrument based on the IPOR Index is a 28 day cancellable swap which uses a peer-to-pool model between a trader and the liquidity pool as underwriter for both pay-fixed and receive-fixed contracts. The DEX allows traders to manage risk of interest rate volatility. The bespoke AMM relies on traditional quant models such as Hull White and jump diffusion to model and manage risk for volatile rates movements present in DeFi credit markets.
“The IPOR protocol has the potential to be the base layer of the DeFi credit markets by closing interest rate spreads and creating a de facto standard for risk-free investments. In the current state of DeFi, capital markets are extremely fragmented due to a multiplicity of money market protocols intra and inter-chain with different liquidity profiles, assets, utilization curves and risk profiles,” said Michael Arrington, founder at Arrington Capital. “The obvious outcome is extreme dispersion of interest rates. IPOR addresses this issue head-on by tracking rates across protocols and generating the IPOR Index, the foundation for a cross-chain, aggregate risk-free rate.”
Following an oversubscribed token round with industry leading investors such as Arrington Capital, CMT Digital, gumi Cryptos, New Form Capital, and GSR, the protocol has been under construction for the past 18 months to vet the quant and smart contract models. After nearly 90,000 wallets interacting with the protocol on testnet and over 600,000 contracts taken, the robustness and scalability of the protocol are now ready for public launch.