Just read about @Spectra and here’s why I think it’s cool. DeFi has an issue with variable yields - you might stake an asset for a 10% APY but then volumes drop and that asset is now only earning 5%. How do we lock in rates in DeFi to avoid variable yields? IRDs.

Interest Rate Derivatives (IRDs) are a solution that’s already in place within TradFi that essentially work by locking in borrowing rates. In DeFi, this is harder to do because liquidity is scattered across multiple chains and doesn’t have centralized control that monitors flows to help lock in rates. @Spectra has a solution.

Their system works by splitting up interest into principle yield and floating yield - represented by Principle Tokens (PTs) and Yield Tokens (YTs). A principle yield is locked in (for example 8% APY) and the user is guaranteed that amount of yield and is paid out in PTs. Additional yield can be accessed through further exposure to YTs, allowing users to speculate to receive a higher APY.

@2077 Research wrote a great paper that discusses this idea further https://research.2077.xyz/spectra-finance-moving-toward-a-more-robust-defi-ird-ecosystem…