Today, we are excited to introduce the Tenor Protocol whitepaper.

Tenor is a self-executing and non-custodial protocol that enables curators to deploy efficient fixed rate lending AMMs on top of existing money markets in a layered approach. The protocol enables users to lend and borrow at fixed rates by utilizing a set of fully onchain interest rate order books.

What Does Tenor Enable?

Tenor markets facilitate the peer-to-peer (P2P) matching of lenders and borrowers at fixed rates. These markets can be deployed by curators or DAOs on top of any pre-existing money market (e.g. Morpho) thereby expanding their utility. Tenor markets inherit the risk parameters of money markets, making them simple to deploy and easy for users to opt into.

Tenor’s protocol design addresses key UX and capital efficiency issues of existing fixed-rate protocols, paving the way for broader adoption. Here’s what it means for users:

More Flexibility for Lenders and Borrowers

• Lower Slippage: Tenor enables P2P matching with low slippage, provided a sufficiently narrow interest rate spread.

• Support for Any Trade Size: Users can execute trades of any size via limit orders.

• Yield-Bearing Liquidity: Pending limit orders are effectively deposited in the underlying money market, thus earning the variable rate while they are unmatched.

• Unopinionated Interest Rate Models: Full flexibility with a limit order book style UX.

• Efficient Market Making: Mitigates liquidity fragmentation across different maturities via a highly optimized cross maturity collateral framework.

• Passive Loan Management: Passively roll loans forward or fallback to the money market at maturity.

• Early Repayment and Exits: Offers the flexibility to repay or exit early.

Empowering Curators & DAOs

• Enhanced Utility: Expands the utility of money markets by enabling users to opt into fixed rates.

• Additive: The TVL of the fixed-rate market can flow down entirely to the money market.

• Modular: Tenor markets are modular by design, allowing them to leverage a money market's existing user and capital base.

• Additional Fees: Curators & DAOs can generate additional fees (e.g., trading fees, OEV capture).

• Low Overhead: Tenor fixed rate markets inherit the risk parameters of the money market, requiring no additional risk management for curators.

The Vision for Tenor

The Tenor protocol aims to enable best-in-class fixed rate lending and borrowing infrastructure for the onchain economy. We believe lending markets will follow a similar path to DEXs shifting from:

• Monolithic to Modular designs

• Pool-based AMMs to Order Books

Modularity enables curators & DAOs to deploy more customized markets. As modular lending markets continue to professionalize and scale, we believe that layering order books on top of money markets is necessary to increase efficiency & enable new use cases.

Why Do Order Books Matter?

While pool based variable rate markets are currently favored by curators for their simplicity, their volatility and inefficiency can be restrictive. As more of the economy moves onchain, curators & DAOs need the ability to support fixed rate order books to scale their offerings. Order book based markets also offer better economics for lenders, borrowers, and curators.

What’s Next?

The Tenor contracts will be deployed on testnet soon™️, accompanied by a scaled down version of the app allowing early users to test core features. Audits are planned for later this year.

Feel free to reach out on X or at contact@tenor.finance if you’re a curator or interested in learning more.