Tenor Raises $2.5M to Build a Modular Fixed Rate Lending Protocol

We’re excited to announce that Tenor raised a $2.5M Seed round led by Cherry Crypto. This investment round will support Tenor in its development of a noncustodial, self-executing fixed rate lending protocol allowing for permissionless market creation and efficient matching of lenders and borrowers at fixed rates.

Also participating in the round are Coinbase Ventures, Lattice Fund, Curved Ventures, Will Price, Jez, Blurr, Atka, Very Early, BatuX, Scott Shapiro and builders from Moonwell, Re7, Degenscore, Daedalus, Octav, and Etherfi.

A Modular Approach to Fixed Rates

Tenor is developing a new fixed rate lending protocol focused on efficiency and modularity. The Tenor protocol enables the permissionless deployment of efficient fixed rate lending AMMs on top of existing money markets in a layered manner. The architecture of the protocol unlocks four key benefits.

Improves Matching Efficiency

The Tenor protocol allows lenders and borrowers to match directly at fixed rates onchain, cutting the structural utilization spread of traditional money markets and giving borrowers certainty over their borrowing cost. The protocol's interest rate AMM enables both lenders and borrowers to benefit from improved matching efficiency.

Offers a Better UX for Lenders and Borrowers

The Tenor protocol removes the pain of the interest rate kink of traditional money markets, offering a more compelling UX to borrowers when borrowing using correlated assets or borrowing stablecoins against their crypto collateral. The ability to borrow at fixed rates mitigates the need to unwind positions due to rapid changes in a market’s utilization.

The protocol also allows lenders to opt into a passive fixed rate lending experience, where their lending position automatically rolls forward when it matures.

Layers on Top of Money Markets

Tenor fixed rate markets can be layered on top of existing money market protocols inheriting the money market’s existing parameters. Tenor markets are built to require no additional governance making them simple to deploy on top of existing money markets by curators and DAOs.

Furthermore, Tenor fixed rate markets are built on top of money market’s variable rate tokens such that all pending liquidity on Tenor is deposited into the underlying money market while idle. Tenor effectively enables the creation of a fixed rate term structure on top of any money market.

Improves Flexibility for Users

The flexible nature of the Tenor protocol allows market creators to build fixed rate markets adapted to their users needs. Creators can use Tenor markets to expand the features of their existing markets, enabling their users to execute a variety of actions, such as setting limit orders, creating liquidity positions, or yield trading.

The protocol's flexible market infrastructure enables users to interact efficiently with fixed rate markets—for example, by renewing a borrowing position, borrowing at a fixed rate in one maturity while lending fixed in another, or borrowing fixed while lending at the money market’s variable rate. The Tenor protocol is built to create highly adaptable and efficient market tooling for curators.

Fixed Rates: A Key Building Block of a Maturing Industry

It is our belief that as more of finance moves onchain and stablecoin adoption continues, the creation of an efficient fixed rate lending and borrowing primitive that integrates with existing money markets is necessary. Money markets have a strong presence in DeFi; however, their massive spreads and unpredictability offer a clear opportunity for improvement.

The recent growth of protocols like Pendle also signals that the market is slowly adopting fixed rates. We believe that this is the start of a broader trend toward a larger adoption of onchain fixed rate markets. Furthermore, the shift toward modular money market protocols, such as Morpho, Euler, and Aave V4 highlights that market creators need flexible infrastructure for building and deploying onchain lending markets tailored to their specific use cases.

As more markets and applications move onchain, Tenor aims to provide curators and builders robust fixed rate market infrastructure to help grow the onchain economy.

What’s Next?

The closing of Tenor’s seed round is an important milestone toward building the Tenor protocol.

The next step for Tenor is to undergo security audits from leading providers in the space starting with Spearbit. As recently announced, Tenor was selected by the Uniswap Foundation Security Fund to audit its interest rate AMM. We’re looking forward to completing security audits and releasing the Tenor protocol to the world.

A Call to Action

We’ve been extremely excited by the enthusiasm received from curators, protocols, and the broader community regarding the Tenor protocol. If you’re a builder looking to learn more about building on Tenor or a community participant interested in diving into the details of the protocol, make sure to reach out; we’d love to talk!