IRDs are primed to become one of crypto’s more captivating narratives in the years ahead. As the sector begins to embrace what TradFi has long-utilised, Rho stands ready to unlock this sector’s full potential.

The decentralised economy has seen a slew of TradFi models and products make their way into the space recently. One of these concepts is interest rate derivatives (IRDs).

IRDs are a cornerstone of TradFi, representing a market worth $500 trillion. They allow market players to hedge risks associated with fluctuating interest rates or to speculate on these rates.

DeFi, which relies on rewarding money inflows with yields, stands to gain immensely from integrating IRDs. According to DefiLlama data, there are nearly 15,000 pools generating yields in DeFi. The problem? Most of these pools have a volatile APR which impacts LP returns and poses a major challenge to DeFi’s ability to meet the financial needs of the world.

To address these challenges, platforms such as PendleFi and IPOR have made important strides. However, Rho’s upcoming launch is set to introduce a host of new features that could supercharge the growth of IRDs in the decentralised space.

Interest rates drive economies

In a September 2023 CoinDesk op-ed, CoinFund President, Christopher Perkins, writes that the crypto world has created its own unique rates. He draws parallels between staking in crypto and interest rates in traditional financial markets. Chris observes that the staking economy could serve as a fundamental pillar of activity in crypto by facilitating new financial products, improving risk management, and opening new possibilities for traders.

Yet, the crypto ecosystem currently lacks the robust infrastructure layer desperately needed by professional traders and institutions to manage these yields efficiently.

Why Rho

This is a gap that Rho aims to bridge. We are creating a vital piece of institutional-grade infrastructure for traders to hedge against or to capitalise from the significant volatility in TradFi and crypto-native interest rates via a single exchange.

Our solution uses a proprietary Concentrated Liquidity Virtual (vAMM) for price discovery, and a proprietary margin engine to manage underlying assets. We offer superior capital efficiency for hedging, speculation, position management and liquidity provisions.

Our first family of products are fixed-to-floating interest rate futures on a diverse set of index rates.

• Centralised and decentralised lending/borrowing market rates

• Staking reward rates (at the time of writing, the global staking market cap sits at over $320bn)

• Other floating rates that already exist or will emerge in the digital asset ecosystem

Crypto’s new exciting asset class

The above represent a significant and mostly untapped source of income for participants — LPs, traders etc — with potential values in the hundreds of billions of dollars. Crypto market analysts like Arthur Hayes have pinpointed it as the sector’s next “killer trading product”.

We believe Rho’s launch is timely, coinciding with DeFi’s TVL surge of 39% in 2023, and as interest in crypto-native yields — staking in paritcular –having caught the attention of institutional investors.

In Q1 2024, we saw Fidelity file for a spot ETH ETF with a staking component. More recently, Grayscale Investments launched an investment fund aimed at exposing its clients to the income generated from staking cryptoassets.

These developments signal that the staking economy has now become impossible for institutions to ignore.

Here at Rho, we stand ready to seize our moment by offering a robust, user-friendly, and highly capital-efficient platform for trading this emerging asset class.

For the latest updates on our journey, be sure to follow us on LinkedIn and Twitter. (TG channel is coming soon!)

To discuss partnerships, or if there is a feature you would like to request, please contact hello@rholabs.io