In traditional financial markets, interest rates are not only the cost of borrowed funds but also the 'anchor' of the entire financial system. The central bank's policy interest rate, government bond yields, interbank lending rates, and benchmark rates such as LIBOR and SOFR have long been the foundation of market pricing. Institutions manage risk and optimize returns through forward contracts, interest rate swaps, and other tools. However, with the rapid development of DeFi, these traditional financial logics are being reconstructed. The emergence of @Treehouse Official is one of the core drivers of this reconstruction, attempting to provide a unified interest rate layer on-chain, allowing DeFi to gradually evolve into a system that can stand alongside traditional finance rather than just being a 'yield-driven testing ground.'


Logic of interest rates in traditional finance

In traditional finance, interest rates are a highly centralized product. Central banks influence market liquidity by adjusting benchmark interest rates, commercial banks decide loan and deposit rates based on this, and financial institutions measure the cost of funds through government bond yields, repurchase rates, and other tools. The overall transparency of the system is limited, and individual investors have almost no voice. While the stability of the market is strong, the pace of innovation is often slow.

Another characteristic of the traditional interest rate market is the high threshold. Most interest rate derivatives are only open to institutions, making it difficult for ordinary investors to participate directly. For example, FRA and interest rate swap transactions are almost a game between banks and funds, and even if individuals understand the logic behind it, they find it hard to truly access this market.


The interest rate dilemma of DeFi

In contrast, the interest rate logic of DeFi is more fragmented. Different lending protocols (such as Aave and Compound) each have independent interest rate models, with supply and demand fluctuating rapidly, leading to frequent interest rate volatility. Users lack a unified reference standard and effective forward tools to hedge risks. More seriously, institutions are rarely willing to enter this market on a large scale due to concerns about risk and uncertainty.

When using lending protocols myself, I often encounter a dilemma: today the interest rate seems appropriate, but I have no way to judge what it will be three months later. If interest rates rise significantly in the future, the cost of funds will exceed expectations; if they fall significantly, the staking returns may not be stable enough. This uncertainty makes me feel that DeFi is far from mature in risk management.


@TreehouseFi's innovation: DOR and tAssets

The emergence of Treehouse is precisely to fill this gap. It provides transparent interest rate references through DOR (Decentralized Offered Rates), aggregating interest rate data from different protocols and assets to form a unified on-chain benchmark. This method avoids manipulation of centralized quotes while ensuring the timeliness of data. Compared to traditional financial benchmark interest rates, DOR is more open and transparent, allowing anyone to verify the data source.

At the same time, the tAssets (such as tETH) launched by Treehouse also impressed me. In traditional finance, collateral is often fixed and non-composable, while tAssets not only retain staking returns but can also serve as collateral to enter other protocols. This innovation of 'yield tokenization' allows users not to have to choose between yield and liquidity, but to enjoy both simultaneously. I personally feel that this mechanism is more flexible than most collateral designs in traditional finance, fully aligning with the open spirit of DeFi.


On-chain implementation of FRA versus traditional FRA

In terms of FRA, Treehouse's logic is similar to the traditional market, but the execution method is completely different. Traditional FRA relies on interbank market quotes, which carry risks of opacity and even manipulation, while Treehouse's FRA is based on DOR data, provided and verified by node staking $TREE , ensuring public verifiability.

Additionally, Treehouse's FRA uses assets like tETH as collateral and settlement tools, allowing transactions to go beyond the digital contract level and be supported by real assets. This makes me feel that it is safer and more capable of winning the trust of institutions. In the future, when more institutions enter DeFi, they can completely lock in their funding costs on-chain through Treehouse, just as they would in traditional finance using FRA.


Differences in governance and participation

In traditional interest rate markets, the rules are set by central banks and large financial institutions, and ordinary investors have no voice. In the #Treehouse ecosystem, governance is open. Users who hold and stake $TREE can directly participate in parameter adjustments, asset listings, and ecological decisions.

This decentralized governance feels very meaningful to me. It not only gives different roles (developers, lending protocols, institutions, ordinary users) a voice, but also aligns the direction of ecological development more closely with community consensus. This is something that traditional finance cannot achieve at all, and it is where I most look forward to DeFi changing the financial landscape.


Gaia plan and market expansion

I am particularly optimistic about the role of the Gaia plan in this. Through Gaia, Treehouse not only provides access tools for developers but also attracts lending protocols, yield aggregators, and derivatives platforms to jointly build the interest rate ecosystem. Each new participant will further strengthen the authority of DOR and the use cases of tAssets.

In traditional finance, it takes decades of market accumulation for interest rate benchmarks to become industry standards, but on-chain, through Gaia's open cooperation model, this process may be significantly shortened. @Treehouse Official combines the interests of partners with $TREE incentives, allowing them to gain governance rights while obtaining economic benefits. This binding method ensures the long-term stability of the ecosystem.


My observations and feelings

In my view, Treehouse's design is not just about moving traditional financial interest rate tools on-chain, but it has undergone deep reconstruction. It retains the core logic of the interest rate market while integrating the openness, transparency, and composability of DeFi, forming a completely new ecosystem.

As someone who has long studied investment structures, I often compare the advantages and disadvantages of both. The advantage of traditional finance lies in stability and compliance, but it lacks innovation and openness; Treehouse's advantage lies in transparency and efficiency, but it also faces challenges in education costs and risk control. I personally believe that these two will eventually tend to integrate, institutions will increasingly adopt on-chain interest rate tools, and DeFi will gradually learn from the risk control and compliance experience of traditional finance.

In summary, the biggest difference between Treehouse and traditional financial interest rate tools lies in openness and transparency. The rules of the traditional market are set by a few, making it difficult for individuals to participate; whereas the interest rate ecosystem of #Treehouse is open, allowing anyone to use data and participate in governance. @Treehouse Official not only innovates at the technical level but also promotes ecological expansion through the Gaia plan, making FRA, tAssets, and DOR the benchmark tools for interest rates on-chain.

In this process, TREE is not only a means of incentive but also the core of governance and value capture. As more protocols and institutions join, $TREE demand will continue to increase, and the long-term value it embodies will gradually become apparent.

I personally believe that this open and transparent interest rate ecosystem is the prototype of future finance. It draws on the robust logic of traditional finance while showcasing the innovative power of DeFi. If the interest rates of traditional finance are shaped by central banks and banks, then the future on-chain interest rates may be defined by protocols like Treehouse.