In the traditional financial system, the 'Risk-Free Rate' is one of the most important financial benchmarks. It is typically defined by the yield on U.S. Treasury bonds and is considered the safest and most predictable return, thus becoming the anchor for pricing all assets and managing risks. However, in the development of DeFi over the past years, there has been a persistent lack of such a rate benchmark. Users see a wide variety of returns across different protocols, but there is no unified reference, which makes risk assessment and investment decisions vague.
The idea proposed by Treehouse emerged against this backdrop. They believe that Bitcoin, due to its reliance on external variables such as electricity and hardware, lacks yield stability and is therefore not suitable as an on-chain 'Risk-Free Rate.' In contrast, the staking yield of Ethereum possesses stronger systemic characteristics and predictability. The annualized yield from ETH staking comes from block rewards and transaction fees, which is a relatively stable cash flow that is independent of external factors, making it the most promising candidate for the 'Crypto Risk-Free Rate.'
Treehouse's DOR (Decentralized Quoting Rate) mechanism aims to standardize and make this potential 'Risk-Free Rate' transparent. Through objective data inputs within the protocol and decentralized consensus, DOR can output a credible interest rate curve for the entire DeFi ecosystem to reference. This not only helps retail investors better compare different yield products but also provides institutional funds with reliable risk management tools.
From a longer-term perspective, if DeFi wants to truly go mainstream and attract large-scale institutional funds, a transparent and verifiable 'Risk-Free Rate' benchmark is essential. Treehouse's exploration in this area signifies that DeFi is gradually filling in critical infrastructure gaps. This is not only a product innovation but also a leap at the level of the financial system.
