Kairos enables the permissionless creation of swap markets where users can trade fixed and floating rate payments based on any oracle-provided rate.
These markets allow users to effectively convert variable rates into fixed rates for any tenor, enabling new fixed-rate products to be built onchain.
Most onchain yields are variable, forcing lenders to chase better yields as conditions change. Kairos allows lenders to instead convert their variable rate yield into a fixed rate without touching the underlying position. For example, a user could deposit stablecoins into the Aave pool and purchase a swap to fix their yield for a defined length of time so they know what they'll earn over that period.
Most onchain borrow rates are variable, leaving borrowers with unpredictable borrowing costs. With Kairos, borrowers can purchase an interest rate swap where they pay the pool a fixed rate in exchange for a floating rate that matches their borrow cost. The two variable streams net, and the borrow cost is effectively converted into a fixed rate.
Kairos allows traders to capitalize on rate movements in a highly capital efficient manner. For example, if a trader believes the Aave yield rate will increase, they can get leveraged exposure to the upside by purchasing a swap where they pay a fixed rate and receive the floating rate. Because settlement is based on the notional of the swap (i.e., not the collateral), it can be significantly more capital efficient as compared to a principal deposit into the Aave pool.
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