In an announcement on June 30, Element Finance declared that it has officially been deployed to the Ethereum mainnet after nearly a year of research and development.
The protocol aims to bring high fixed-rate yields to DeFi while maximizing capital efficiency. Users will be able to purchase discounted BTC, ETH, and USDC without being locked into a fixed term.
In early April, Element Finance raised a total of $4.4 million in a seed round that was led by Andreessen Horowitz and Placeholder.
Solid yields for fixed terms
The first term is a three-month crvLUSD initiative which is a balanced pool of the top stablecoins on the Curve Finance protocol. Within a few hours of launching, the 90-day term had accrued over $16 million in liquidity prompting the team to launch another term.
“We are blown away at the current progress and engagement! We’ve decided to add a new 6-month crvLUSD term. Excited to see how the market forces will differ between the two terms.”
At the time of writing the three-month term had $18.2 million in collateral while the six-month term had $764,000 in total value locked according to the platform.
Element CEO and co-founder Will Villanueva commented on the impressive yields the protocol was already offering:
“This is incredible! The 3 month term already is giving an additional 3.6% APY for LPs and the 6 month an additional 16.22% APY. This is just trading fees, without a token and in addition to exposure to the 12% APY of the vault or the 7% fixed rate APY.”
The Element protocol essentially splits the base asset positions into two distinct separate tokens, the principal token and the yield token. The splitting mechanism allows users to sell their principal as a fixed-rate income position, further leveraging or increasing exposure to interest without any liquidation risk.
Fixed rates for DeFi
Element is not the first DeFi protocol to delve into DeFi fixed-rate yield. In October 2020, BeInCrypto reported that Yield Protocol launched a new type of fixed yield token. The first of these was fyDai, which enabled fixed-term and rate borrowing and lending using the MakerDAO stablecoin, DAI.
In April, Notional Finance raised $10 million in a seed round led by Pantera Capital. The protocol offers a fixed-rate lending platform that gives users the certainty needed to plan for the future by borrowing against their crypto collateral.