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In DeFi’s volatile lending and borrowing sector, fixed-rate lending services are fast gaining attention. Swivel Finance is the latest to turn investors’ heads.
Multicoin Capital again participated in Swivel Finance's latest $3.5 million funding round and was joined by trading desks GSR Markets, SCC Investments, and CMT Digital. OKEx Ventures, Fenbushi Capital, IOSG Ventures, and SevenX Ventures also contributed to the latest round.
Swivel uses a two-token model to achieve a fixed-interest yield, in contrast to the likes of Aave, which offers just one. If you deposit Ethereum in Aave, you get aETH, the yield-bearing version of Ethereum, in return. Compound uses a very similar yield-bearing token for user deposits.
The two tokens on Swivel are called “nTokens” and “zcTokens,” with the former behaving in a similar manner to a traditional yield-bearing token.
When a user deposits 100 USDC into Swivel, that deposit is then split into 100 nUSDC and 100 zcUSDC.
The zcUSDC is locked up for a predetermined period and can be redeemed 1:1 for the underlying USDC once this period is finished. Until that period, however, the zcUSDC is traded at a discount equivalent to the predicted future yield generated by the nUSDC.
And as these rates are tokenized, traders can just as easily short and long expectations within the variable-rate market, says Traversa. “If a trader wants to long variable rates, all they do is purchase nTokens which increase in value as rates increase. Then, to short rates, a trader borrows and then sells nTokens, similar to shorting spot markets.
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In DeFi’s volatile lending and borrowing sector, fixed-rate lending services are fast gaining attention. Swivel Finance is the latest to turn investors’ heads.
Multicoin Capital again participated in Swivel Finance's latest $3.5 million funding round and was joined by trading desks GSR Markets, SCC Investments, and CMT Digital. OKEx Ventures, Fenbushi Capital, IOSG Ventures, and SevenX Ventures also contributed to the latest round.
Swivel uses a two-token model to achieve a fixed-interest yield, in contrast to the likes of Aave, which offers just one. If you deposit Ethereum in Aave, you get aETH, the yield-bearing version of Ethereum, in return. Compound uses a very similar yield-bearing token for user deposits.
The two tokens on Swivel are called “nTokens” and “zcTokens,” with the former behaving in a similar manner to a traditional yield-bearing token.
When a user deposits 100 USDC into Swivel, that deposit is then split into 100 nUSDC and 100 zcUSDC.
The zcUSDC is locked up for a predetermined period and can be redeemed 1:1 for the underlying USDC once this period is finished. Until that period, however, the zcUSDC is traded at a discount equivalent to the predicted future yield generated by the nUSDC.
And as these rates are tokenized, traders can just as easily short and long expectations within the variable-rate market, says Traversa. “If a trader wants to long variable rates, all they do is purchase nTokens which increase in value as rates increase. Then, to short rates, a trader borrows and then sells nTokens, similar to shorting spot markets.
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