- Jet, a Solana-based crypto lending platform, is pioneering a shift in the industry by introducing fixed-rate term lending.
- The newly adopted model employs an order book system where borrowers and lenders establish their own terms, including interest rates and repayment timelines.
In a noteworthy shift within the cryptocurrency lending landscape, Jet, a lending platform powered by Solana, has reconfigured its approach to offer fixed-rate loans. The decision reflects strategies seen in traditional finance, presenting an innovative divergence from most crypto competitors that largely offer variable rate products.
Jet’s freshly overhauled model hinges on an order book design. This system empowers borrowers and lenders to dictate their own conditions, setting unique interest rates and timelines for repayment. This is a marked departure from the customary fluctuating rates that have been an entrenched characteristic of the crypto lending scene.
Founder James Moreau highlighted the advantages of this market-based mechanism, explaining that it doesn’t rely on any artificially derived annualized percentage yield (APY), but rather on open market conditions.
In the existing crypto sphere, lending protocols often advertise shifting interest rates that can rocket or plummet within a day, inherently promising substantial returns against considerable risk. However, Moreau emphasized that Jet’s approach, although inherently less risky, might face some resistance, particularly from significant traders and market makers. These players have grown accustomed to the fluidity of variable-rate products, which often allow for the withdrawal of funds at any moment, assuming that the utilization rate is not exceedingly high.
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Despite the seeming benefits of a fixed-rate product, it means the invested cryptocurrency is locked for the entire duration of the contract. This marks a paradigm shift in terms of flexibility and liquidity, posing a potential challenge to its adoption.
Jet’s performance metrics, akin to many Solana protocols, have witnessed a significant dip since their 2021 peak when the total value locked surpassed $36 million. However, the current value stands below $200,000.
Even with the noticeable drop, Moreau remains optimistic about Jet’s new lending product. While acknowledging that fixed-rate lending may not induce an immediate influx of liquidity back to Solana, he maintains that it could attract a specialized subset of Decentralized Autonomous Organizations (DAOs) and other on-chain entities. Such entities often have substantial idle treasuries that can be effectively utilized. Moreau also sees potential among traders of staked SOL, particularly those employing maximal extractable value (MEV) strategies.
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