IPOR

Derivatives

IPOR (Inter Protocol Over-block Rate) is an interest rate derivative DEX that developed a permissionless interest rate index. IPOR allows users to hedge their exposure by leveraging non-custodial on-chain interest rate swaps.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
IPOR serves to be the heartbeat of DeFi by introducing a decentralized equivalent of the "risk-free rate" that is calculated in real-time on-chain.
What we like less
The protocol currently relies on a centralized oracle but there is a path to oracle decentralization in the roadmap.
What it means for you
IPOR enables users to go long or short interest rates to hedge interest exposure, arbitrage between interest rates, and speculate on rate trends.
Information
Exploit/Hacks
One
Info
  • Website
  • Token: IPOR
  • Tags: Derivatives
Key Metrics
  • TVL: $20.5M (Rank #106)
  • TVL Ranking by Derivatives: #5
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $20.49M
Risk Assessment
Watch Out
Protocol Code Quality
  • Code reviewed by at least one experienced auditor (Zokyo)
  • Public team promotes accountability
  • One mitigated protocol hack since launch
Protocol Maturity
  • Core protocol launched in 2022; maturity less than a year increases technical risk as smart contracts are less battle-tested
  • Top 10% by total value locked reduces risk
  • Governance decentralization is in the roadmap
  • At least one critical governance issue documented
  • Low voting power concentration reduces risk
Protocol Design
  • No concerns identified
Things to know about IPOR

How IPOR works

IPOR (Inter Protocol Overblock Rate) is a standardized benchmark based on on-chain DeFi transactions. The protocol currently offers two products: the IPOR index and an AMM for interest rate swaps (IRS). In TradFi, major financial institutions use benchmark rates like LIBOR to reflect the fair market cost of lending and borrowing, or known as the risk-free rate. In Defi, no such equivalent benchmark exists and rates for major lending protocols like Aave and Compound can be extremely volatile. IPOR offers multiple indices, representing different assets like USDT, USDC, and DAI. These indices are calculated in real-time on-chain and can be adjusted via governance. The IPOR index serves as a proxy for the DeFi risk-free rate and is calculated as the market cost of money defined by the weighted average from money markets like Aave and Compound. IRS allow users to exchange the cash flows between fixed and floating rates. Users who long an IRS are betting on an increase in rates by paying a fixed rate and receiving a floating rate. Users who are short are betting on a decrease in rates by paying a floating rate and receiving a fixed rate. IRS are generally settled by the losing party to the winner, or someone who takes the opposite trade. In IPOR, the counterparty is the liquidity pool. In exchange, liquidity providers earn fees paid by traders to open a trade, P&L from traders (traders' gain is LPs' loss), and leveraged yield on idle assets (a portion of assets is lent out on money markets). The IPOR AMM actively sets spreads based on external data so that LPs exposure is neutral. IPOR determines the spread based on market conditions, including volatility, recent changes, trend, maturity, and sudden jumps.

How IPOR makes money

The IPOR AMM charges several fees including an opening fee (currently 1% of collateral), a base flat fee (currently $10), and an income fee (currently 10% of trader and LP profits). A refundable liquidation deposit (currently $25) is also charged upon opening an IRS position.

How you make money on IPOR

Users can use IPOR for several reasons including hedging their interest rates, arbitraging divergent rates, and speculating on future rates. For example, a hedger with a variable USDC loan may use IPOR IRS to short interest rates (receive fixed and pay floating). This way if rates go up, the user will pay more interest on the loan but will be offset by the earnings on the IRS. And if rates go down, the IRS will lose money but the losses will be offset by the lower rate on the USDC loan. Arbitragers may come to IPOR to capture a risk-free profit between two stablecoins. For instance, stablecoin A has an IPOR rate of 2.5% and stablecoin B has an IPOR rate of 5.5%. A trader could borrow stablecoin A and take in a pay-fixed IRS to lock in the borrowing cost, exchange stablecoin A for stablecoin B, and then lend stablecoin B and lock in the lending rate with a receive fixed IRS. Speculators can also use IRS to long or short interest rates in anticipation of future market trends.

IPOR Pools