Announcing IPOR Fusion, the next stage of development for the IPOR Protocol in becoming the Credit Hub of DeFi.

DeFi liquidity is fragmented and new farms rise to popularity overnight. We need an engine that takes advantage of changing market dynamics turning rate volatility into opportunity for traders, farmers, asset managers, and protocols.

Since its inception, the IPOR Protocol has traded over $4.4 billion in notional interest rate and stake rate swaps volume. IPOR is about rates data, derivatives, and structured products. What started with stablecoin indices and interest rate swaps has expanded to stake rate swaps underwriting native ETH yield, and soon — LRT restaking rate derivatives.

⚛️ IPOR Fusion

IPOR Fusion is a meta DeFi credit markets engine which literally transforms liquidity into pure power.

In the nuclear sense, fusion converts atomic particles into plasma, a pure liquid energy source. In DeFi IPOR Fusion takes liquidity and supercharges it to flow between yield sources seeking the best returns.

One of the biggest challenges in DeFi is to execute on the fast-changing strategies and new protocols. The yield landscape in DeFi moves at the speed of light. Asset managers and yield farmers need to be able to react to the rapid launch pace and constantly migrate to the best opportunities.

Imagine if you take the best parts of different aggregation and routing protocols into a single smart contract layer, attach it to a gigabrain, and let it automagically manage your assets.

You get intelligence-driven execution for looping, carry trades, arbitrage, leveraged farming, and passive lending curated by the best asset management minds in DeFi and driven by advanced algorithms, quant finance insights, and artificial intelligence to identify the most profitable yield opportunities available for a specific asset at any given time.

It provides a single integration point to ever-expanding yield venues, and combines it with an intelligence layer for automated rebalancing, optimization, and risk management.

With IPOR Fusion each new integrated protocol adds to the network effect and the entire ecosystem benefits. It commoditizes integration and focuses on strategy and optimization. Asset managers can capitalize on the latest pools while yield farmers can enjoy immediate benefits of the latest yield opportunity. It not only reduces the operational burden on capital allocators, but also enhances the efficiency and effectiveness of capital deployment across DeFi’s yield venues.

⚛️ Why Fusion, Why Now?

DeFi money markets have evolved since DeFi summer 2020, from being dominated by cross-collateral oracle-based protocols, to isolated permissionless oracle-less markets and everything in between. Some markets focus on the most elegant expression with minimal lines of code while others deliver feature-rich out-of-the-box marketplaces. The yield stripping and leveraged credit constructs have morphed into massive leveraged pre-TGE token farms.

With so many different venues, integrations, and primitives there is evolution, but also widespread liquidity fragmentation, volatile rates, and an ever expanding set of protocol integrations making it difficult to arb rates at the speed of light.

IPOR Fusion transforms liquidity into opportunity, crafting the art of risk-adjusted yield management and harnessing the power of DeFi composability. Its beauty is its ability to compose liquidity into yield strategies that flow to the best opportunities.

IPOR Fusion has different parts, but you can think of it in two simple ways:

1. An execution core for automation.
2. An intelligence layer for optimization.

Liquidity providers, credit, and leverage players are connected in a single interface to optimize and manage their activities with a single integration, intents-based execution connected to an intelligence layer, and automated asset reallocation and risk management. DeFi deposit, credit, leverage, carry trades, and arbitrage are operations that require multiple integrations, complex logic, constant monitoring, and manual execution.

Fusion simplifies this into a generalized DeFi credit markets middleware attached to a marketplace where the best minds in quant finance, risk management, and artificial intelligence curate signals and strategies.

IPOR Fusion gives DeFi power users, funds, and retail a single integration point to optimize their yields, manage risk, and build bespoke strategies tailored to their risk reward criteria.

⚛️ Who Uses Fusion And How Does It Interact With Other Protocols?

Fusion was built for all credit market players and introduces several new primitives and roles.

🔹IPOR Fusion

The core execution layer and intelligence system.

🔹Fuses

Smart Contract Connectors to external Protocols.

🔹Atomists

Asset managers and DeFi philosophers as strategy creators and curators.

🔹Plasma Vaults

Strategies created by Atomists where users can deposit their assets.

🔹Alphas

Keepers feeding intelligence on-chain and providing execution logic (think solvers in DEX aggregation).

⚛️ Fusion Users

🔸Protocols

Protocols with idle liquidity can use Fusion to optimize their capital efficiency. For example, IPOR Liquidity Pools will themselves be Fusion users for automated optimization of the assets deposited into the protocol. IPOR has always had this construction for depositors, and with the automation of Fusion can provide even juicer returns.

🔸Funds and Fund Managers

DeFi or TradFi asset managers can build their own strategies on Fusion, select their counterparty risk by choosing a subset of available fuses, set rebalance conditions, and configure fee structures.

🔸DAO Treasuries

DAO Treasuries could be the power users of Fusion. They have the fiduciary duty to protect the assets of the DAO while optimizing its yield in the lowest risk possible. Treasury managers could choose to compose their own strategies, or deposit into other Plasma Vaults.

🔸Individuals

Depositors can choose their desired Plasma Vaults to allocate funds, or even set up their own Plasma Vault if they think they can outperform others. Rising influencer with a gigabrain? Advertise your skills to the market and become your own fund manager.

🔸Fuses: DeFi Protocol Integrations

Fuses are the key mechanism to connect the IPOR Fusion engine to different protocols. Each fuse is atomic, immutable, and with limited functionality. Fuses can be created by the protocols themselves, by the IPOR DAO, or by individual collaborators and will undergo a rigorous screening and security process within the IPOR DAO. That means there will also be a vetting mechanism and potentially DAO rewards for the creation, curation, and revision of fuses.

The first set of fuses is likely to be the leading DeFi credit markets starting with Aave, Compound, Morpho Blue, Gearbox, and up and coming protocols such as Euler V2, Fluid, Ajna and more. After the money markets the fixed income markets will be integrated including Pendle, Notional V3, Term Structure, and Term Finance. Fusion will also integrate different markets such as Dexes and Perps to fulfill functions like swapping for looping and hedging.

The IPOR Interest Rate Derivatives and Stake Rate Derivatives will also be fuses integral for structured products.

🔸Composable Structured Products

Another way to imagine Fusion is the infrastructure for structured credit products in DeFi. If we take an example of leveraged looping between ETH borrow and stETH return, add an IPOR ETH borrow rate swap on one side, and a stake rate swap on the other and you have a fixed yield vault. With opportunistic hedging this could squeeze an extra 40% out of the yield based on backtests. While the ETH stETH loop may have run its course, the same flow and set of derivatives will play a huge factor in a post-points world with ETH money market and LRT yields.

Fusion runs parallel to the existing markets.

In allocating capital to the highest yields, optimizing borrowing, and allowing users to roll leveraged positions between the most effective paths, it enables credit market arbitrage at a massive scale as well as has a market efficient function.

It also has a self-fulfilling role in the IPOR Index. In an efficient market, interest rates will converge to IPOR, as the Index represents the liquid sentiment of DeFi credit. Efficient markets, aligned rates, and tight swaps spreads aid the construction of the yield curve in DeFi.

⚛️ Testnet, Design Partners, and Collaborations

The IPOR Labs team is busy in the lab building Fusion. It will be rolled out in two different iterations.

First, the deposit functions with optimal asset allocation will be launched with a select set of protocol integrations and fuses. If you’re interested in early integration please reach out. The IPOR Liquidity Pools for USDT, USDC, DAI, and stETH will themselves be some of the first Plasma Vault integrators.

The credit and leverage functions with collateral and risk management will be built out in the next iteration. These will allow for the composability of leveraged structured product vaults.

If you are interested in becoming a design partner or getting involved in the testnet all IPOR DAO collaborations go through the IPOR Discord.

Reach out if you are:

• an open-source developer, a protocol that wants fuse integrations
• an asset manager with a requested set of fuses and risk management requirements
• interested in optimizing yield on idle protocol liquidity (we will be publishing integration guidelines and feel free to reach out for integration help)
• an asset manager interested in leveraging the Plasma Vaults to build strategies
• a quant or a.i. team with expertise in solving complex logic to drive on-chain execution
• a gigabrain interested in working with IPOR Labs

We invite all kinds of collaboration to build a collaborative, open meta DeFi credit engine for the next generation of asset management.

Leave a comment below if you have any questions. Be sure to join our Discord community to receive the most relevant updates on the IPOR Protocol and Interest Rates in DeFi. Meaningful product discussions are highly valued, and spam is strongly discouraged. Be cautious, and don’t fall for impersonators.

Disclaimer：

1. This article is reprinted from [Medium]. All copyrights belong to the original author [Darren Camas]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.