TREE Series (31): DOR Solves the Risks of Interest Rate Manipulation
In the traditional financial world, benchmark interest rates such as LIBOR or SOFR are often criticized for being too easy to manipulate. Remember the LIBOR scandal from a few years ago? Several major banks colluded to manipulate interest rates, leading to distortions in the global financial markets and substantial losses for investors. Under this centralized mechanism, a few institutions can dictate the situation, lacking transparency and easily breeding corruption. Moving to the DeFi space, we need a more reliable solution, and the DOR (Decentralized Offered Rate) of the Treehouse protocol perfectly fills this gap.
The design inspiration for DOR comes from the decentralized nature of blockchain; it is not determined by a few individuals or institutions but rather formed through a consensus mechanism to create the interest rate curve. The panel members—these are vetted professional entities—regularly submit interest rate forecasts and market data, and after aggregating everyone’s data, an algorithm derives the final benchmark interest rate. What if someone submits false data? Don’t worry; they must stake TREE tokens as collateral. If the data deviation is too large, the staked TREE will be confiscated, directly linking their interests to the health of the protocol. Operators are responsible for maintaining the data flow, while delegates support panel members by staking tAssets, ensuring the entire system is resistant to censorship and transparent.
Compared to traditional interest rates, DOR’s biggest advantage lies in its forward-looking nature and fairness. It does not rely on a single source; instead, it aggregates multiple perspectives to form a reliable risk-free interest rate curve, such as TESR (Treehouse Ethereum Staking Rate). This is revolutionary for DeFi products, where interest rate swaps and fixed lending can be based on DOR, avoiding manipulation risks. TREE tokens play a crucial role here, not only for paying query fees but also incentivizing active participation in consensus. In the long run, DOR can reshape on-chain finance, allowing ordinary users to enjoy a fair fixed income environment, avoiding those hidden tricks behind the scenes.
In summary, DOR is not a simple replication of traditional systems but addresses the problem at its root. Through the cryptoeconomic security of TREE, it makes DeFi interest rates more reliable and democratized. In the future, with more on-chain expansions, DOR will become a benchmark for decentralized finance.
