Voltz Protocol: Interest Rate Swaps for Efficient Lending Markets

Lending markets are among the largest DeFi protocols in terms of TVL, with collectively over $50B of TVL and $20B of active debt at peak (see Figure 1 below). Most lending protocols (Aave, Compound, Cream, etc.) are variants of the automated money market protocol popularized by Compound, which were much more successful than predecessors like EthLend or Nuo.  

Much like early decentralized exchanges, early on-chain lending markets used contracts to match user deposits with borrow requests in a purely peer-to-peer manner. This, of course, was extremely inefficient since negotiating terms on a per loan basis fragmented liquidity and created significant barriers for borrowers.