Design of a Decentralized Fixed-Income Lending Automated Market Maker Protocol Supporting Arbitrary Maturities

TL;DR

This paper introduces BondMM-A, a decentralized fixed-income AMM protocol that supports arbitrary maturities, enhancing flexibility and capital efficiency in DeFi lending markets.

Contribution

It generalizes the BondMM protocol to support multiple maturities within a single smart contract, improving operational freedom and robustness.

Findings

Excellent interest rate stability

High financial robustness

Supports arbitrary maturities

Abstract

In decentralized finance (DeFi), designing fixed-income lending automated market makers (AMMs) is extremely challenging due to time-related complexities. Moreover, existing protocols only support single-maturity lending. Building upon the BondMM protocol, this paper argues that its mathematical invariants are sufficiently elegant to be generalized to arbitrary maturities. This paper thus propose an improved design, BondMM-A, which supports lending activities of any maturity. By integrating fixed-income instruments of varying maturities into a single smart contract, BondMM-A offers users and liquidity providers (LPs) greater operational freedom and capital efficiency. Experimental results show that BondMM-A performs excellently in terms of interest rate stability and financial robustness.