Skip to main content

Fairates

Leaderless sealed‑bid fixed‑rate lending: the way TradFi already does it, finally onchain.

TL;DR​

Traditional Finance (TradFi) has been relying on sealed-bid, single-price auctions to sell trillions of dollars of fixed-rate debt (US Treasury bills and repo) because they hide order flow and clear at a single, fair price. By contrast, onchain lending is dominated by variable-rate even as appetite for fixed income soars. The fixed-rate auction designs in the market today still leak bids by keepers. Fairates brings TradFi’s auction model onchain with leaderless sealed-bid auctions: one fixed rate for everyone who wins and no one can censor or frontrun your order. 

  • TradFi solved fixed‑rate lending decades ago with sealed‑bid, single price auctions so nobody can copy‑trade you, everyone clears at one fair rate, and price discovery is fast. The U.S. Treasury still finances itself this way.
  • DeFi lending is massive ($65B+ TVL) but still mostly floating‑rate. Fixed‑rate income is clearly in demand, but fixed‑rate lending itself is still tiny and leaks information.
  • Morpho V2 announced fixed‑rate, fixed‑term direction, but bids are remain fully exposed onchain. Fairates runs the auction itself confidentially and leaderlessly, then settles onchain at a single clearing rate.
  • Fairates: leaderless, sealed‑bid auctions (no privileged decryptor, no manipulation, no slippage tax) that clear one fixed rate for all winners, replicating how the world’s largest debt markets already operate.

What TradFi already figured out and DeFi hasn’t​

The largest, safest fixed‑income markets use sealed‑bid, single‑price auctions because they hide order‑flow, prevent copy‑trading, and clear everyone at the same price. The U.S. Treasury runs uniform‑price auctions; repo and commercial paper are also priced in tightly run, information‑minimizing markets.

In contrast, DeFi lending today:

  • $65+B of lending TVL is still predominantly floating‑rate (Aave, Compound, Morpho Blue, Spark, JustLend, etc.)
  • Fixed‑income demand is exploding (Pendle alone has $6B+ TVL) but the lending side of fixed‑rate is still underserved and often leaks information.
  • Early fixed‑rate lenders like Term Finance run auctions, but keepers still reveal bids, which re‑introduces leakage and coordination risk.
  • AMMs impose an implicit tax (slippage and price impact). Notional highlighted 10 bps slippage on a $1M stablecoin trade. Auctions clear one rate for everyone.

Why auctions beat AMMs for fixed‑rate credit​

Single‑price sealed‑bid acutions provide:

  1. One price for everyone: no AMM curve to climb.
  2. Encrypted bidding until the end: no copy trading, no frontrunning.
  3. Deterministic price discovery at a fixed time, not a constantly shifting curve.

This is why the US Treasury standardized on single‑price auctions. Fairates is bringing that muscle memory onchain.

Why now​

  • The market is asking for fixed‑rate, fixed‑term rails (Morpho V2), and fixed‑income trading is booming (Pendle). Tom Zschach, Swift’s Chief Innovation Officer, is raising concerns about information leakage and the need for “selective confidentiality.” Fairates is arriving exactly as the market realizes fixed‑rate price discovery and confidentiality are the missing pieces.
  • Institutions are here: Coinbase baked Morpho loans directly into the app. Those same institutions will not leak size or intent if they can avoid it. Confidential auctions are the obvious bridge.
  • TradFi’s playbook says auctions are superior to AMMs for fixed‑rate credit. Fairates has the cryptography (MPC, DKG, IBE) to deliver it in DeFi without a trusted auctioneer.

Introducing Fairates​

Fairates: a fixed‑rate lending market that clears via a leaderless, sealed‑bid, single‑price auction.

  • Leaderless: there is no trusted auctioneer who can decrypt, censor, or peek. Decryption keys are split among a decentralized validator set via MPC and DKG (multi‑party computation + distributed key generation).
  • Sealed‑bid: your size, rate, and timing stay confidential until the auction closes.
  • Single clearing rate: every winning lender and borrower gets the same fixed rate, like a Treasury auction.
  • Composable: the resulting fixed‑rate notes can be tokenized and traded in DeFi without leaking the original bid sizes.

How Fairates works​

  1. Pick your term (e.g., 4 weeks) and the rate you want.
  2. Submit an encrypted bid. Nobody (not even Fairates) can see it.
  3. Auction closes: decentralized decryption (no leader, no privileged key).
  4. One fixed clearing rate is determined.
  5. Winners settle onchain: borrowers get their loan; lenders receive a fixed‑income note they can hold to maturity.

Sources​