How Does TermMax Work?
TermMax is a fixed-rate lending and borrowing protocol that lets users lock in guaranteed interest rates for specific time periods, similar to how a certificate of deposit works in traditional banking. Instead of dealing with constantly changing DeFi rates, lenders buy discounted tokens (FTs) that can be redeemed at full value when they mature. Borrowers put up collateral and receive loans at a known, fixed cost. The protocol uses a customized AMM to let the market discover fair lending rates and supports multiple chains including tokenized stock collateral.
TVL
$66M
Sector
Lending
Risk Grade
C+
Value Grade
C-
Core Mechanisms
6.2.4
NovelFixed-rate lending via zero-coupon bond tokenization: FT tokens purchased at discount, redeemed at par at maturity
FT (Fixed Token) acts as a zero-coupon bond representing a commitment to repay 1 debt token at maturity. Lenders buy FT at a discount and earn a fixed return. The complementary XT token ensures FT + XT = 1 debt token at all times.
4.1.2
NovelCustomized Uniswap V3 AMM for fixed-rate price discovery with configurable range orders
TermMax adapts Uniswap V3 concentrated liquidity mechanics for interest rate markets. Market makers configure range orders to set lending/borrowing rate preferences.
6.3.2
NovelPhysical delivery liquidation: lenders receive collateral directly rather than liquidation auction proceeds
Novel liquidation mechanism where underwater positions deliver collateral to lenders rather than selling on market. Designed to support low-liquidity and RWA collateral.
6.1.4
Isolated lending markets with per-pair risk parameters and maturity dates
Each lending market is isolated with its own collateral, debt token, maturity date, and risk parameters.
6.4.1
Chainlink oracle feeds for collateral price discovery and liquidation triggers
Standard Chainlink oracle integration for pricing collateral assets.
2.2.4
Split fee model: spread between lending and borrowing rates accrues to protocol and curator vaults
Revenue from the bid-ask spread on fixed rates splits between protocol treasury and curator-managed vaults.
5.4.1
Multisig-controlled protocol parameters with Hypernative 24/7 monitoring
Protocol parameters controlled by team multisig. Hypernative provides real-time monitoring. Bug bounty active on Immunefi.
How the Pieces Interact
If the AMM for FT/XT trading has thin liquidity near maturity, the implied rate can diverge significantly from fair value. Large trades can manipulate the implied rate, creating arbitrage at the expense of passive lenders.
Physical delivery of illiquid RWA or tokenized stock collateral forces lenders to hold assets they may not want or be able to sell. During market stress, this creates forced holding of depreciating assets.
At maturity, all positions in a market settle simultaneously. A stale or manipulated oracle at the maturity timestamp could cause incorrect liquidation for many positions at once.
Curators allocate vault deposits across isolated markets. A curator misjudging credit risk of a specific market could expose depositors to losses in markets they did not choose.
What Could Go Wrong
- Fixed-rate tokenization via FT/XT/GT introduces novel mechanism complexity; the FT+XT=1 debt token invariant relies on correct smart contract implementation at maturity settlement
- Physical delivery liquidation is a novel approach where lenders receive collateral directly instead of market-sold proceeds, creating exposure to illiquid collateral risk
- Customized Uniswap V3 AMM curves for interest rate pricing introduce untested edge cases at extreme rate environments or low liquidity
Mass Maturity Liquidation Cascade
ModerateTrigger: Market crash coincides with major maturity date, causing mass liquidations via physical delivery
- 1.Broad market downturn pushes collateral values below liquidation thresholds — Multiple borrowing positions become undercollateralized near maturity
- 2.Physical delivery liquidation forces lenders to receive depreciating collateral — Lenders hold illiquid or rapidly depreciating assets
- 3.Lenders exit curator vaults to avoid further exposure — Vault TVL drops, reducing lending capacity
- 4.New borrowers cannot find lenders — Protocol activity stalls, FT prices collapse
Risk Profile at a Glance
Overall: C+ (40/100)
Lower score = safer