💲Borrow/Lend Strategies

TermMax provides fixed borrowing and lending rates, which contrasts with other protocols that typically offer floating rates. This difference enables users to employ various strategies to optimize their investments and manage risks.

The Uncertainty of Floating Borrowing and Lending Rates in DeFi

In traditional DeFi platforms without TermMax, borrowing and lending are often conducted at floating interest rates that fluctuate with market conditions. This volatility introduces significant unpredictability, making it difficult for users to forecast profits or losses accurately. Borrowers may face unexpected increases in repayment costs, while lenders might experience diminishing returns as rates change. This lack of stability exposes both parties to financial risks, undermining investment strategies and overall financial planning.

Unpredictable Margin in Floating Borrowing/Lending Rates

TermMax addresses this issue by offering fixed interest rates for both borrowing and lending. This ensures that borrowers have certainty over their repayment costs and lenders receive stable, predictable returns. By fixing both rates, TermMax eliminates the financial risks associated with fluctuating interest rates, providing a more secure and reliable environment for borrowing and lending activities.

Strategy 1: Borrow Fixed on TermMax, Lend Floating Elsewhere

How It Works:

• Borrowing:

  • Platform: TermMax

  • Rate Type: Fixed (Low Rate)

• Lending:

  • Platform: Other DeFi Protocol

  • Rate Type: Floating (High Rate)

Benefits:

• Fixed Borrowing Costs: Predictable expenses.

• Potential High Returns: Benefit from high floating lending rates.

Possible Margin Zone under Fixed Borrowing Rate and Floating Lending Rate

Strategy 2: Borrow Floating Elsewhere, Lend Fixed on TermMax

How It Works:

• Borrowing:

  • Platform: Other DeFi Protocol

  • Rate Type: Floating (Low Rate)

• Lending:

  • Platform: TermMax

  • Rate Type: Fixed (High Rate)

Benefits:

• Fixed Lending Returns: Stable and predictable income.

• Initial Low Borrowing Costs: Benefit if borrowing rates remain low.

Possible Margin Zone under Floating Borrowing Rate and Fixed Lending Rate

Strategy 3: Borrow Fixed on TermMax, Lend Fixed on TermMax

How It Works:

• Borrowing:

  • Platform: TermMax (Market A)

  • Rate Type: Fixed (Low Rate)

• Lending:

  • Platform: TermMax (Market B)

  • Rate Type: Fixed (High Rate)

Benefits:

• Predictable Profit Margin: Both costs and returns are fixed.

• Simplified Management: All within TermMax.

Fixed Margin under TermMax's Fixed Borrowing Rate and Fixed Lending Rate

Strategy Overview

Strategy	Borrowing Platform	Borrowing Rate Type	Lending Platform	Lending Rate Type	Profit Stability
1. Borrow Fixed on TermMax, Lend Floating Elsewhere	TermMax	Fixed (Low Rate)	Other Protocol	Floating (High Rate)	Stable Costs, Variable Income
2. Borrow Floating Elsewhere, Lend Fixed on TermMax	Other Protocol	Floating (Low Rate)	TermMax	Fixed (High Rate)	Variable Costs, Stable Income
3. Borrow Fixed on TermMax, Lend Fixed on TermMax	TermMax (Market A)	Fixed (Low Rate)	TermMax (Market B)	Fixed (High Rate)	Stable Costs and Income

Important Considerations

• Risk Management: Each strategy carries its own risks, including interest rate risk, liquidity risk, and platform risk. Users should carefully assess these risks before engaging in any strategy.

• Market Research: Stay informed about current interest rates on both TermMax and other protocols to identify optimal opportunities.

• Due Diligence: Evaluate the security and reliability of any external protocols involved in these strategies.