In traditional financial markets, interest rates are essentially controlled tightly by central banks and commercial banks. For instance, when you deposit a fixed term at a bank, whether the annual interest rate is 1.5% or 2% is not a result of negotiation but a figure the bank decides based on the central bank's benchmark rate. Even more absurdly, past instances of Libor being manipulated have emerged—several large banks colluded to artificially inflate or deflate rates, causing numerous investors to suffer!
Moreover, traditional finance's fixed-income products (like term deposits and bonds) suffer from poor liquidity and low transparency: you lose interest if you withdraw your bank deposit before maturity; bonds rely on market makers to maintain trading volume, or else you may find it hard to sell. Users who want to earn more? They either risk buying high-risk investment products or have to accept low interest rates!
Treehouse's breakthrough approach: tAssets and DOR, making interest rates 'market-oriented'!
1. tAssets: Your deposit certificate, which can also serve as a 'flexible investment tool'!
In the Treehouse protocol, when you deposit ETH (Ethereum) or liquid staking tokens (LST), you receive corresponding tETH. This is not just an ordinary deposit receipt! It acts more like a 'universal currency' within the Treehouse ecosystem, allowing for flexible allocation across different yield strategies—like if you think the stable strategy will yield steady returns today, you can invest your tETH; if tomorrow you spot a high-risk, high-reward strategy, you can switch anytime!
Compared to traditional fixed deposits, the yield of tETH is not set by banks, but dynamically adjusted through DOR. If market interest rates rise, your yield increases; if market interest rates fall, your yield decreases—you are no longer a passive recipient but an active participant in the formation of market interest rates!
2. DOR: On-chain transparent interest rates, specifically addressing 'manipulation scandals'!
DOR (Decentralized On-Chain Rates) is the core innovation of Treehouse. It uses smart contracts to aggregate on-chain market data in real-time (such as lending rates and liquidity pool depth), dynamically generating a fair interest rate that completely relies on the market, not a few institutions' quotes.
Think about traditional finance's Libor, where a few banks can lock themselves away to discuss a rate that influences the global market; on the other hand, all data from DOR is publicly transparent on the blockchain, so no one can sneakily manipulate it! In theory, this can prevent interest rate manipulation and allow rates to more accurately reflect market supply and demand.
However, DOR also faces challenges—it currently deals with insufficient liquidity and low market recognition. For instance, if the amount of funds participating in the quotes is too small, the generated interest rate may fluctuate too much, making it unreliable. Treehouse's solution is to make tAssets the 'liquidity base' of the interest rate market. In simple terms, it uses a large amount of ETH and LST deposited by users as support, making DOR’s pricing more representative. If enough funds flow in the future, DOR might just become the 'benchmark interest rate' on-chain!
@Treehouse Official #Treehouse $TREE
