Illuminate - DeFi: Fixed

An introduction to the Illuminate ecosystem.


Illuminate provides institutions and applications optimized routing across all DeFi liquidity in order to capture a maximal fixed APY. Most simply described, Illuminate aggregates and wraps principal tokens with similar maturities and underlying assets into one single (meta) principal token (iPTs).

The meta principal token (iPT) is traded on a secondary market YieldSpace AMM to provide access to Illuminate’s optimized yields and enable the scalability all expirable applications – from lend/borrow, aggregation and “Banking” (Maker, Liquity, etc.,) to options + futures.


The fixed-yield space first saw traction in 2020 with Dan Robinson & Allan Niemerg's paper on "YieldSpace -- An Automated Liquidity Provider for Fixed Yield Tokens", their YieldSpace concept having since been extended by ~10 protocols.

This early research led to significant experimentation with regard to optimizations of the YieldSpace model and enabled a number of different yield origination models so long as they utilize a tradable principal token (PT).

Protocols such as Swivel take interest-bearing deposits from across the entirety of the Ethereum (and Layer-2) ecosystem and enable the decomposition of these deposits into their future yield - leaving behind the deposits redemption in the form of a PT.

Protocols such as Porter & Maple allow DAOs and institutions to issue collateralized debt through PTs and borrow directly from lenders at a fixed-rate.

And protocols such as Yield allow anyone to deposit their collateral and mint PTs that they can sell and effectively borrow against at a fixed-rate.

These protocols have seen consistent growth with an overall market that has oscillated between 500m-2b, however even with consistent growth significant issues remain in the current market structure that prevents scalability and the participation of most major cohorts.

Current Issues

Without scalable liquidity or optimized yields, user-facing applications (Yearn, Maker, InstaDapp, etc.), integrators (Contango, FiatDAO, etc.), rate-traders, and large depositors are all unable to participate in the fixed-rate space.

Inefficient structural design across numerous facets (instrument standardization, IMM dates, liquidity fragmentation, etc.) prevents the deployment of liquidity to any significant degree.

Specifically, integrators and applications are unable to scale, while DeFi's institutions are faced with the same concerns as recently failed banks (SVB, Credit Suisse) with regard to the exit liquidity available should they themselves experience their own liquidity event.

Structural Flaws

Prohibitive Integration

Integrators are currently unable to confidently integrate fixes rates in any form.

Whether looking to deposit capital as an aggregator or a new project looking to build around fixed-rate infrastructure, liquidity and market structure remain core issues.

User-Facing Integrations (Defi's "Banks")

Many protocols (Maker, Yearn, Indexcoop, etc.) effectively act as deposit aggregators with a mandate to optimize yield for their users or organizations.

Similar to traditional banks (e.g. SVB & Credit Suisse), this mandate extends to fixed-term instruments (PTs), and in a similar vein, PTs are the most illiquid part of their balance sheets.

That said, should a user-facing application face their own liquidity crunch, significant market liquidity for PTs is necessary to ensure the effective exit of large positions.

Protocol Integrations

Other protocols (Contango, FiatDAO, Napier, etc.) build around fixed-rates utilizing PTs as part of their core infrastructure.

These applications are currently limited to integration with sole fragmented liquidity sources meaning their own scalability is entirely dependent on unreliable liquidity and suboptimal yields.

Further, should an application attempt to source their own liquidity across multiple PTs, developer teams are then faced with integrating multiple currencies and tenors for each protocol, a maintenance debt that scales exponentially as liquidity is sourced.

Native Market Inefficiencies

Without consistent maturity dates, arbitrageurs are unable to interact cross-protocol, and market-makers are unable to remain delta neutral.

Without a system to bridge similar maturity dates, each protocol's liquidity exists in a silo, and unlike new spot DEX/AMMs that can easily attract arbitrageur liquidity, each protocol suffers from the need to bootstrap individually.

This fragmentation results in inefficient market pricing, and exacerbates the already insufficient depth for larger market participants.

Poor User Experiences

Retail users are currently faced with the need to compare offerings across a staggering number of protocols, which themselves source yields from a variety of of lending markets.

In context of recent market events (Anchor), retail users are faced with the need to conduct due diligence to identify the risks of reach protocol, as well as their integrated/partner lending markets.

These asks are unreasonable of even advanced market participants.

Illuminate remediates all of the above issues through the creation of an aggregated meta principal token (iPT).

Through this single interface for fixed-yields, we guarantee lenders the best rate in DeFi, developers the best integration and optimized yields, and traders the depth necessary for active participation.

Lenders: Lend confidently with access to previously inaccessible liquidity and knowledge that source of their yield is optimal.

Protocols: - Aggregators & DAOs: Deploy scalable capital to fixed-rates without risks surrounding withdrawals and concerns of poor exit liquidity. - DeFi Integrators: Build scalable integrations utilizing fixed-rate infrastructure with access to both scalable liquidity and an optimized source of yield.

Traders: Trade actively across fixed-rate protocols, arbitraging rates and no longer concerned with risks surrounding asynchronous maturities.

Illuminate -- An Ecosystem

Described further in Integrations, the existence of deep fixed rate liquidity enables an ecosystem of products built upon "maturity atomicity", starting with Illuminated Options.

Maturity Atomicity

In traditional contexts, instrument composability is relatively restricted by settlement delays and large ticket sizes.

However in the context of Defi / atomic transactions, settlement delays are irrelevant and instruments can be created with tight maturity tolerances (preferably atomic), enabling an increasingly rehypothecated and higher yielding financial stack.

Rephrased, developers can create instruments that mature simultaneously and in doing so construct products with a structural composability (and high yield) that is impossible to compete with traditionally.

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