# Fixed-Rate Lending: Market Structure and Protocol Design

> A report on the protocols building fixed-rate and fixed-maturity credit products

- Source: https://castlelabs.io/research/reports/fixed-rate-lending-market-structure
- Published: August 2026, 34 pages; data as of August 2026
- Authors: Noveleader
- Publisher: Castle Labs (https://castlelabs.io)
- Full PDF (free, email required): https://docsend.com/v/sjv2g/fixed-rate-lending

## Thesis

DeFi lending supports $28.5 billion in active loans, but almost all demand remains in variable-rate markets. The report compares fixed-rate and fixed-maturity designs that make borrowing costs explicit while addressing fragmented liquidity, idle capital and early exits. It covers incumbent-led models from Morpho, Jupiter and Kamino alongside purpose-built markets including Term Labs, TermMax, Fira, Loopscale, Liquity, Flex and IRIS Credit.

## Key findings

- DeFi lending had $28.5 billion in active loans at the report snapshot, with almost all demand still served by variable-rate markets.
- Morpho Midnight uses tradable credit and debt units to improve early exits and had reached $2 million in active loans by the end of August, after its July launch.
- Jupiter Offerbook had reached $450,000 in active loans using fixed terms of one to 30 days and maturity-based collateral transfer instead of continuous liquidation.

## Key numbers

- $28.5B: Active loans across DeFi lending markets
- $430M: Fira active loans, the largest fixed-rate market
- $4B+: Capital in Morpho Vaults available to future Midnight adapters
- $2M: Active loans in Morpho Midnight by the end of August
- $450K: Active loans in Jupiter Offerbook
- 1-30 days: Typical Jupiter Offerbook loan terms

## Fixed-Rate vs Variable-Rate Lending in DeFi

DeFi lending had $28.5 billion in active loans at the time of the report, and almost all of it was variable-rate. Variable pools solved instant borrowing against collateral, but the rate follows a utilisation curve. In a stress event that curve moves, rates spike, and borrowers are forced to exit or deleverage. Fixed-rate and fixed-maturity markets let lenders know their yield and borrowers know their cost before the loan starts.

Demand comes from three groups. Date borrowers, such as funds, treasuries, RWA issuers and basis desks, need debt that matures when an asset, redemption window or strategy does. Certainty borrowers, such as loopers and levered yield users, need a stable cost so their spread does not shrink. Lenders and curators want to choose duration, collateral and return instead of taking whatever utilisation produces.

**Why earlier fixed-rate markets struggled, and how new designs answer**

| Problem | What goes wrong | How new designs answer it |
| --- | --- | --- |
| Fragmented liquidity | Liquidity splits by maturity, rate, collateral and duration, so each market is thin | Multi-market offers (Morpho Midnight), rate and duration grids (Kamino), virtual markets (Loopscale) |
| No early exit | Lenders are stuck until maturity unless someone buys their position | Tradable credit and debt units (Midnight), discounted bond tokens on an AMM (TermMax, Fira), a FIFO withdrawal queue (Kamino) |
| Cold start | Capital sits idle, earning nothing, while it waits for a match | Capital moves only when a match settles and earns variable yield until then (Midnight, Term V2, Jupiter Offerbook, Kamino) |
| Maturity | Borrowers may repay, roll, fall back to variable debt or fail to repay | Auto-roll with a fallback to variable rates (Tenor, Kamino); auto-refinancing with 48 hours to repay (Loopscale) |

Source: Castle Labs, Fixed-Rate Lending: Market Structure and Protocol Design (August 2026)

## Morpho Midnight vs Jupiter Offerbook vs Kamino: How the Big Lenders Do Fixed Rates

Morpho, Jupiter and Kamino all run large variable-rate markets, and in 2026 each added fixed terms in a different way. Morpho built a separate protocol with tradable positions. Jupiter built an intent-based book with no price-based liquidation. Kamino added fixed-rate reserves inside its existing lending market, so borrowers see a term structure next to the variable rate they already use.

**Fixed-rate products from variable-rate incumbents, August 2026**

| Protocol | Design | Exit before maturity | At maturity | Active loans |
| --- | --- | --- | --- | --- |
| Morpho Midnight (launched July 2026) | Intent-based zero-coupon lending; positions are credit units and debt units, and their price sets the rate | Lenders sell credit units; borrowers buy debt units to cut what they owe | Tenor, built on Midnight, rolls loans through keepers and falls back to Morpho Blue's variable rate | $2M; Morpho Vaults hold over $4B that can quote once the vault adapter ships |
| Jupiter Offerbook (public beta June 2026) | Intent-based book with terms of 1 to 30 days and no price-based liquidation | Short fixed terms instead of a secondary market | If the borrower does not repay, the lender takes the collateral | $450K |
| Kamino Fixed Rate Lending (whitepaper) | Fixed-rate reserves inside Kamino Lend, laid out as a grid of rates and durations | FIFO withdrawal queue; the wait is capped by the reserve's duration | Auto-roll into the next term, or fall back to the variable rate | Whitepaper stage at publication |

Source: Castle Labs, Fixed-Rate Lending: Market Structure and Protocol Design (August 2026)

Tenor Finance, which DeFi Frontier calls the HIP-3 of Midnight, is the access layer on top. It adds auto-renewal, onchain OTC quotes shared with whitelisted counterparties, and organisation accounts that let institutions run gated credit markets with their own KYC rules. The Tenor team expects asset managers on one side and businesses on the other.

## The Main Fixed-Rate Lending Protocols in 2026

Purpose-built protocols set the fixed rate in different ways: auctions, AMM curves, order books or rates the borrower picks. Fira has by far the most active loans at $430 million, but almost all of that is its Usual Zero Rate market, so it is not directly comparable with multi-market venues.

**Purpose-built fixed-rate protocols, August 2026**

| Protocol | How the rate is set | Active loans | Notable detail |
| --- | --- | --- | --- |
| Fira | Borrowers sell a Bond Token (BT) at a discount on a BT/FW AMM; BT works like Pendle's PT and the Coupon Token (CT) like YT | $430M, almost all from Usual Zero Rate (UZR) | Interest is built into the discount at origination, not charged over time |
| Loopscale | Credit order book of bilateral loans; virtual markets pool liquidity by collateral, loan asset and duration | $55M | Auto-refinances at maturity and gives 48 hours to repay if no lender is found; curator vaults for passive lenders |
| Liquity V2 | Borrowers pick their own rate when minting BOLD against ETH, wstETH or rETH | $32M of BOLD in circulation | If BOLD trades below peg, the lowest-rate borrowers are redeemed first |
| TermMax | Fixed Rate Token (FT) trades at a discount like a zero-coupon bond; 1 FT + 1 XT = 1 debt token | $30M | Lenders quote by size, for example the first $10K at 5% and the next $10K at 5.5% |
| Term Labs | Auction where every bid clears at one rate; Term V2 (early August 2026) adds intent-based matching | $3.7M | Hit by an $8.5M governance exploit in its Meta vaults |
| Flex | Borrowers pick their rate, as in Liquity V2; lender exits redeem the lowest-rate Troves first through a collateral auction | About $900K two months after launch | Bad debt from underwater liquidations can be spread across the lender vault |
| IRIS Credit | Solvers quote a fixed rate and refinance across lending venues, posting bonds sized from a three-year simulation | Pre-launch | Takes blue-chip collateral because it has a rate history to model |

Source: DefiLlama data in Castle Labs, Fixed-Rate Lending (August 2026)

Curators are building fixed rates too. KPK runs a fixed-rate ETH lending vault on Euler with about $700K in deposits. Its borrow rate resets once a month at 90% of Treehouse's ETH staking-yield benchmark minus 20 bps, which makes looping costs predictable. Aave launched Stable Vaults in July, an early sign of predictable credit products from the largest lender.

## Data tables

**Fixed-rate lending by protocol, end of August 2026**

| Protocol | Type | Active loans |
| --- | --- | --- |
| Fira | Purpose-built, Pendle-style | $430M (mostly the UZR market) |
| Loopscale | Purpose-built credit order book | $55M |
| Liquity V2 | Borrower-set rate CDP | $32M of BOLD in circulation |
| TermMax | Purpose-built, zero-coupon tokens | $30M |
| Term Labs | Purpose-built auction | $3.7M |
| Morpho Midnight | Incumbent, intent-based | $2M |
| Flex | Borrower-set rate money market | About $900K |
| KPK vault on Euler | Curator-built | About $700K in deposits |
| Jupiter Offerbook | Incumbent, intent-based | $450K |
| Kamino Fixed Rate Lending | Incumbent, rate and duration grid | Whitepaper |
| IRIS Credit | Solver-based origination layer | Pre-launch |

Source: DefiLlama data in Castle Labs, Fixed-Rate Lending (August 2026). All variable and fixed DeFi lending: $28.5B in active loans.

## Charts

- DeFi lending active loans, January to August 2026 (PDF page 4): Almost all of the $28.5 billion is variable-rate debt, priced by utilisation curves that can spike in a stress event.
- Fira active loans, 2026 (PDF page 22): Fira leads the category at $430 million, but almost all of it comes from the Usual Zero Rate market.
- Loopscale active loans, 2026 (PDF page 24): Loopscale's active loans sit at $55 million, one of the largest in the category after Fira.
- Liquity BOLD market cap, 2026 (PDF page 26): $32 million of BOLD is in circulation: the debt Liquity borrowers have minted at rates they chose themselves.
- TermMax active loans, 2026 (PDF page 20): TermMax reached $30 million in active loans, with curator vaults letting passive lenders earn fixed yield without quoting.
- Term Finance active loans, 2026 (PDF page 18): Term's active loans sit at $3.7 million. Term V2, released in early August, keeps capital earning on venues like Aave and Morpho until it is matched.
- Morpho Midnight active loans since launch (PDF page 9): Midnight reached $2 million in active loans by the end of August. Over $4 billion in Morpho Vaults can start quoting once the vault adapter is released.
- Flex active loans since May 2026 (PDF page 28): Flex reached about $900,000 in active loans two months after launch.
- Jupiter Offerbook active loans (PDF page 13): Offerbook reached $450,000 in active loans. Its growth depends on how much long-tail collateral lenders are willing to underwrite directly.

## Questions

### What is fixed-rate lending in DeFi?

A loan where the interest rate, and usually the maturity, is set at the start, so the lender knows the yield and the borrower knows the cost. Most DeFi lending uses variable rates that move with pool utilisation. Of the $28.5 billion in active DeFi loans at the time of the report, almost all was variable-rate.

### Why has fixed-rate lending been hard to build onchain?

Three problems held back earlier versions. Liquidity splits across maturities, rates and collateral, so each market is thin. Lenders cannot exit before maturity unless someone buys their position. And capital sits idle while it waits for a match. Newer designs answer with multi-market offers, tradable positions and capital that keeps earning variable yield until a loan is matched.

### How does Morpho Midnight work?

Midnight, launched by Morpho in July 2026, is intent-based zero-coupon lending. Lenders and borrowers post offers that do not lock capital, and capital only moves when a match settles. Positions are credit units and debt units that can be traded, so lenders can exit early by selling credit units and borrowers can buy debt units back. It reached $2 million in active loans by the end of August.

### What is Tenor Finance?

An access layer built on Morpho Midnight, which DeFi Frontier calls the HIP-3 of Midnight. It adds auto-renewal through independent keepers, a fallback to Morpho Blue's variable rate when no fixed match exists, onchain OTC quotes with whitelisted counterparties, and organisation accounts that can run KYC-gated credit markets.

### How does Jupiter Offerbook avoid liquidations?

Loans run for fixed terms, usually 1 to 30 days, and there is no price-based liquidation. If the borrower does not repay at maturity, the lender claims the collateral. That lets lenders accept long-tail collateral such as NFTs or RWAs with no active price discovery, as long as they are willing to underwrite it. Offerbook had $450,000 in active loans.

### How do TermMax and Fira compare to Pendle?

Both split a loan into a fixed claim and a floating piece, as Pendle does. TermMax's Fixed Rate Token (FT) redeems for one unit of the loan asset at maturity and trades at a discount before then, like Pendle's PT. Fira's Bond Token (BT) works the same way, and its Coupon Token (CT) carries the floating yield, like YT. Fira had $430 million in active loans, almost all in its Usual Zero Rate market; TermMax had $30 million.

### What risks remain with fixed-rate loans?

Fixed rates make the cost of debt explicit but do not remove collateral, default, redemption, solver, LP or refinancing risk. In Liquity V2 and Flex, borrowers who pick a low rate are first in line to be redeemed. If rates run far enough past an IRIS Credit solver's quote, the solver's bond runs out and the borrower pays the floating rate. Term Labs was hit by an $8.5 million governance exploit in its Meta vaults.

## Method

Castle compares protocol design, liquidity formation, maturity handling and exit mechanics across incumbent and purpose-built fixed-rate markets. The analysis combines interviews with Morpho, Tenor Finance, Term Labs and IRIS Credit with protocol documentation and lending balances from DeFiLlama around publication.

## Sources

- [DeFiLlama lending market data](https://defillama.com/protocols/lending?borrowed=true)
- [Morpho Midnight documentation](https://docs.morpho.org/learn/concepts/midnight/)
- [Tenor Finance markets](https://app.tenor.finance/markets)
- [Jupiter Offerbook](https://offerbook.jup.ag/tokens/borrow)
- [Kamino fixed-rate lending announcement](https://x.com/kamino/status/2092248611111227745)
- [Aave Stable Vaults](https://aave.com/blog/introducing-stable-vaults)