Three Major Lending Protocols Enter Fixed Rates: What Are Their Innovations?

Original author: @castle_labs

Original translation: AididiaoJP, Foresight News

Currently, the active loan volume in the lending sector is approximately $28.5 billion, with almost all demand coming from floating-rate products. When the market is calm, this model works fine; but once it enters a stress period, the utilization curve shifts upward and borrowing rates spike sharply. Sudden rate increases often force some borrowers to exit or deleverage, making the entire credit market inefficient.

DeFi money markets have solved something traditional credit cannot: near-instant collateralized borrowing. But one problem remains—borrowers cannot know their debt cost in advance before the loan ends.

This is exactly what many products are now addressing: shifting to fixed-rate, fixed-term credit products. In such a market, lenders can lock in returns in advance, and borrowers know exactly how much interest they will pay.

Demand for this type of market comes mainly from three groups:

• Term-matching borrowers: funds, treasuries, RWA issuers, basis/arbitrage desks that need debt maturity aligned with asset maturity, redemption windows, or strategy cycles.
• Certainty-seeking borrowers: revolving loan users, leveraged yield players, and traders who may not care about exact maturity dates but need stable borrowing costs to avoid compressed spreads.
• Lenders/curators: treasuries, market makers, and allocators who want to choose terms, collateral, and returns on their own, rather than passively accepting what the utilization curve dictates.

Early fixed-rate lending was mainly hindered by three issues:

Liquidity fragmentation. Fixed-rate markets split into multiple markets by maturity, rate, collateral, and term, making matching far more difficult than a single floating-rate pool.

No early exit. Once a loan starts, lenders find it hard to exit before maturity unless there is secondary liquidity, a redemption channel, or a counterparty. Floating-rate markets do not have this problem.

Cold start problem. Lenders are unwilling to lock up funds, sit idle before matching a counterparty, and earn nothing.

As institutional capital increases and more complex strategies like revolving loans emerge, the user structure has changed, and demand for fixed-term markets is rising. A major pain point of on-chain lending is the uncertainty of floating rates; fixed-rate products allow users to lock in returns and costs in advance. It also forces protocols to directly price term, collateral quality, exit liquidity, and refinancing risk, resulting in a better user experience.

This article reviews the approaches of several veteran floating-rate protocols, including Morpho, Jupiter, and Kamino. Together, these three hold $6.83 billion in active loans and have recently entered the fixed-rate and fixed-term market with the above concerns in mind.

Morpho Midnight and Tenor Finance

Morpho, as a veteran floating-rate protocol, launched Morpho Midnight in July. It is an intent-based zero-coupon lending protocol: lenders and borrowers express intents, and positions are represented as debt units (an obligation to repay one loan token per unit before maturity) and credit units (a claim on repaid loan tokens). Midnight provides term flexibility and more predictable underwriting for institutions by making loans tradable. Interest rates are determined by the prices of fixed-term credit units and debt units traded between borrowers and lenders.

In Midnight, lenders and borrowers post "quotes" without locking funds; they merely express intent to lend or borrow in a specific market, at a specific price, maturity, and collateral configuration. Funds are only committed at settlement (callback), thus solving the cold start problem—lenders only deploy capital after a match is made, improving capital efficiency. This also helps attract more liquidity. The Morpho team stated: "Allowing users to continue earning floating rates on protocols like Morpho Blue eliminates the opportunity cost of waiting for a match, thereby incentivizing more quotes and increasing overall available liquidity."

Another issue with fixed-rate markets is liquidity fragmentation: each maturity, collateral type, and rate range can become a separate market. Midnight does not tie up funds at the intent stage, and users can post quotes across multiple markets. "The same capital can quote across multiple markets simultaneously; the total liquidity a single market maker can provide = available capital × number of markets."

Since its launch in July 2026, Midnight's active loans are approximately $3 million. The number is small, but the team believes it will change quickly because it can inherit Morpho's existing network effects and ecosystem. For example, Morpho Vaults currently manage over $4 billion in funds. Once vault adapters go live, these funds can start quoting on Midnight, which will play an important role in deepening liquidity.

The most noteworthy aspect of Midnight is that it solves the early exit problem. In early or illiquid fixed-term markets, borrowers and lenders often lack an exit channel before maturity. Midnight makes positions fungible: lenders can sell credit units, and borrowers can buy debt units to reduce outstanding obligations.

Midnight can be seen as the underlying architecture for fixed-rate lending, and an access layer is already being built on top—Tenor Finance. Some call it Midnight's "HIP-3."

Tenor Finance inherits Midnight's underlying capabilities and adds new features:

Auto-rollover and fallback options. Tenor introduces auto-rollover to avoid liquidation at maturity. It uses independent keepers to roll loans into new fixed-rate terms before maturity. If no fixed-rate counterparty is found, it can fall back directly to Morpho Blue's floating-rate pool.

On-chain OTC protocol. Users can request quotes and broadcast customized OTC quotes, which can be shared with whitelisted counterparties, supporting direct negotiation.

Institutional tools and access control. Tenor provides institutional accounts with role-based permissions. Institutions can use these accounts to deploy customized, gated credit markets, restricting who can borrow and lend according to compliance or KYC requirements.

Tenor reduces maturity friction through auto-rollover and fallback, allowing fixed-term positions to continue more smoothly when matching liquidity exists or fallback conditions are met. Combined with customizability, it is more suitable for institutions. The team's long-term expectation is to serve asset managers on one end and enterprises on the other.

Jupiter Offerbook

Jupiter Exchange's Offerbook entered public beta in June 2026, around the same time as the Morpho Midnight whitepaper release. Jupiter's floating-rate product Jupiter Lend, launched last year, was its first foray into the lending sector; now it is entering the fixed-term market through Offerbook.

Offerbook is an intent-based lending protocol characterized by no price-based liquidation, thus supporting fixed-term lending for long-tail assets.

Loan terms on the platform are short, typically 1 to 30 days. If the borrower fails to repay at maturity, the lender simply takes the collateral; no liquidation occurs. This design allows NFTs, RWAs, or other assets lacking active price discovery to serve as collateral, provided the lender is willing to underwrite. It replaces continuous price liquidation with post-maturity collateral transfer, creating specialized markets that traditional models struggle to support.

Users can post loan or borrow intents, which appear in the app, and liquidity is committed only when a quote is accepted. Since users only confirm when a match occurs, funds can be used elsewhere before the deal, which also alleviates the cold start problem. Both lenders and borrowers can continue earning yield on their funds until they find a fully matching term.

Since launch, Jupiter Offerbook has approximately $450,000 in active loans. The model is unique, but proving the market and scaling it is not easy, as scalability is limited by lenders' willingness to directly underwrite these collaterals.

Kamino

Kamino recently released a whitepaper for a fixed-rate lending protocol. Instead of building a separate fixed-rate market, it adds fixed-rate reserves within Kamino Lend. The advantage is distribution: borrowers can directly see the term structure, and lenders can quote specific rates and terms without fully exiting the floating-rate system, making fixed-rate borrowing incremental.

On the platform, each reserve is defined by rate and term, for example, USDC borrowing at different terms and rates. These combinations of rates and terms form a grid.

Using the grid, Kamino allows borrowers and lenders to express trading intentions in both price and time dimensions simultaneously. Borrowers post borrowing intents specifying collateral, size, maximum rate, and term; lenders post conditional liquidity specifying the rate, term, and amount they are willing to provide. The grid becomes the execution surface: borrowers can withdraw from available fixed-rate liquidity at preset rate and term combinations.

Matching is not one-to-one direct; lenders quote on a structured grid, for example, 4.5% for 1 month, 5% for 3 months, etc., forming a visible term structure and yield curves for different assets. Leveraging Kamino's existing infrastructure, borrowers can either post intents and wait for a match or withdraw directly from existing fixed-rate liquidity on the grid. Additionally, Kamino can automatically roll loans into the next term when liquidity allows, similar to Tenor; if no fixed-rate liquidity is available, it falls back to floating rates. This alleviates the maturity problem and reduces the burden on borrowers of manually managing each maturity date.

Lender exits go through a withdrawal queue. If funds are already deployed and cannot be exited immediately, lenders enter a first-in-first-out queue and are gradually repaid as loans within that reserve mature. The design ensures that the maximum waiting time for lenders does not exceed the reserve's term.

During the matching process, funds do not sit idle; they can still earn yield in floating-rate reserves, which also helps solve the cold start problem.

Conclusion

Fixed rates will not eliminate the risks that floating-rate lending has exposed over the years, but they make debt costs explicit. And that is exactly what DeFi credit has been missing.

The strength of floating-rate pools lies in providing instant borrowing, but they compress everything into a single utilization curve. Fixed-rate markets allow borrowers to price term, lenders to choose term and collateral risk, curators to allocate across terms, and applications to package more predictable credit products. Aave already launched Stable Vaults in July, and early forms of predictable credit products have emerged.

This matters because DeFi lending is scaling. It now supports revolving loans, basis strategies, treasury management, RWA-linked assets, and applications for ordinary users. These users need not just liquidity, but clear, fixed financing terms.

Competition in this sector is expected to intensify, and more new solutions will emerge to scale fixed-rate lending. Current penetration is still very low, and floating rates still dominate the market, but the goal is to grow the pie—these products can cover many scenarios that existing DeFi lending cannot.

They are also trying to solve the pitfalls that earlier similar protocols stepped into, while having stronger distribution: the floating-rate side is already mature. For example, funds in floating-rate markets can continue earning yield and remain efficient while quoting in fixed-rate markets.

As products mature, some strategies that were previously impossible will emerge, and the lending sector may form new flywheels.