The Time Value of Money: A key concept in Traditional Finance

The Time Value of Money is a crucial concept in traditional finance that illustrates how the value of money changes over time. It states that a certain amount of money is worth more in the present than it will be in the future due to its potential to generate income over time.

According to this principle, money has greater value when it is in your possession than if it were to be paid in the future. This is because the money has the potential to generate income through investing and other activities, and delaying the investments means missing out on that opportunity. As a result, money is generally considered worth more when it is in your hands than if it were to be paid later.

The role of Fixed Rates in the DeFi Credit Market

The Time Value of Money principle is not widely used in the DeFi (Decentralized Finance) ecosystem, with only a few protocols besides Exactly Protocol allowing for its implementation. As a result, this leads to the prevalence of variable rates in the DeFi credit market.

In comparison, traditional finance predominantly utilizes fixed rates, with 98% of the volume in fixed-rate products. The average consumer typically has a fixed income and prefers the stability of fixed-rate borrowing to predict their monthly payments better. In the DeFi borrow and lending market, fixed rates only make up a small portion, 2%, of the Total Value Locked (TVL).

Exactly Protocol: Bringing the Time Value of Money to the DeFi ecosystem

To address this issue and bring the DeFi credit market to a broader audience, Exactly Protocol provides a decentralized, non-custodial, and open-source protocol that offers an autonomous fixed and variable interest rate market. This enables users to easily exchange their assets' Time Value of Money, completing the DeFi credit market.

Exactly Protocol’s mission is to bring the Time Value of Money to the DeFi ecosystem by decentralizing it. This means that users can make deposits or loans at a fixed rate for a predetermined period, similar to “fixed income” in traditional finance.

By decentralizing the Time Value of Money, Exactly Protocol helps users mitigate interest rate volatility and facilitates the exchange of the Time Value of money of their assets in the DeFi lending and borrowing market. This enables users to make informed decisions about how to use their money and take advantage of the potential for income generation over time.

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