Borrower Guide
The Problem with Variable Rates
On Aave or Compound, your borrowing rate changes every block. You open a position at 3% and wake up to 15%. There is no way to plan, budget, or manage the cost of capital over time.
In traditional finance, $145 trillion of credit operates at fixed rates. In DeFi, less than 1% does. Fira closes this gap.
How Fira Fixes Your Rate
Fira uses Bond Tokens (BT) — zero-coupon bonds that trade at a discount before maturity and converge to par (face value) at maturity.
The borrowing cost is not an interest rate applied on top of your loan. It is embedded in the discount at which you receive liquidity.
The discount IS the rate. There is no hidden interest.
How It Works
You post collateral
The protocol mints BT against your collateral
You swap BT for USDC (via FW-USDC) at a discount
At maturity, you repay the BT at par value to unlock your collateral
The difference between what you received and what you repay is your total, fixed cost of borrowing — known from the moment you open the position.
Concrete Example: Fixed-Rate Borrowing
Scenario: You want to borrow USDC against collateral on the June 25, 2026 maturity market.
1
Post collateral (e.g., PT-reUSD)
Sufficient for desired borrow
2
Mint 100 BT-USDC
100 BT-USDC
3
Swap 100 BT-USDC for FW-USDC, then unwrap to USDC
Receive ~95 USDC
4
At maturity (June 25), repay 100 BT-USDC
Repay 100 USDC equivalent
Result:
You received 95 USDC today
You repay 100 at maturity
Fixed cost = 5 USDC, known from day 1
Annualized: approximately 5.26% on a ~4-month term — locked at origination
No rate changes. No surprises. No variable rate volatility.
V1: New Features for Borrowers
Pendle PT Collateral
V1 introduces Pendle PT tokens as accepted collateral for fixed-rate borrowing:
If you already hold Pendle PTs, you can now borrow at a fixed rate against them on Fira — no need to sell your PT position.
Multiple Maturities
V1 launches with the ability to add any set of maturity markets:
Choose the maturity that matches your investment horizon. Shorter maturities carry lower duration risk. Longer maturities may offer different implied rates.
Fixed-Rate Markets
V1 fixed-rate markets use market-discovered rates. You choose a maturity, the AMM discovers the rate through supply and demand. The rate you get at the moment of your swap is your fixed rate for the duration.
Floating-Rate Markets
Floating rate markets are available on Fira as well and are designed similarly to other protocols. These rates are spot and floating as they can dynamically changes based on the utilization of supplied assets in the market.
Fira Fixed Rate vs. Variable Rate Protocols
Rate predictability
Fixed at origination. Known from day 1.
Changes every block based on utilization.
Rate mechanism
Discount on zero-coupon bond (BT). No explicit interest charge.
Utilization curve. Interest accrues continuously at variable rate.
Cost visibility
Total cost known upfront in USDC terms.
Total cost unknown until position is closed.
Maturity
Defined.
None. Open-ended.
Early repayment
Possible at any time. Effective rate may differ from initial rate.
Always at current variable rate.
Rate spikes
Position is immune to rate spikes after origination.
Exposed to sudden rate increases (can jump 3% to 15% in one block).
Risk Disclosure
Borrowing on Fira carries material risks. Read this section carefully before committing capital.
Liquidation Risk
If the health factor of your position drops below 1, your collateral becomes eligible for liquidation. The health factor depends on the Loan-to-Value ratio relative to the Liquidation LTV threshold.
V1 fixed-rate markets: Collateral value depends on oracle pricing. PT collateral carries price exposure. Market movements can trigger liquidation before maturity.
Liquidators receive a bonus (Liquidation Incentive Factor up to 1.15x depending on LLTV), meaning you lose more collateral than the debt repaid. For full liquidation mechanics, see Liquidations.
Early Repayment Does Not Lock the Fixed Rate
The fixed rate is only realized if you hold the position to maturity. If you repay early:
You still repay the original BT amount (no reduction in principal)
But the effective rate may be higher or lower than the rate at origination, depending on the BT/FW-USDC exchange rate at the time of early repayment
Early repayment always costs less than or equal to the maximum cost at maturity, but the effective annualized rate is unpredictable.
Smart Contract Risk
Fira is a newly deployed protocol. Despite six independent external audits, an extended internal review, and a bug bounty program up to $500K, residual risk of bugs, exploits, or loss of funds remains. For audit details, see Audits.
Additional Risks
Slippage risk: Large swaps on the AMM may incur price impact, especially in low-liquidity conditions
Oracle risk: V1 markets rely on external price feeds (Chainlink, Redstone) for collateral valuation
One-way migration: Positions migrated from Euler to Fira cannot be sent back
For the complete risk framework, see Risk Framework.
Related
Fixed Rate Markets - Detailed explanation of the mechanics behind fixed rate markets
Floating Rate Markets - Detailed explanation of the mechanics behind floating rate markets
Liquidations — Position health and liquidation mechanics
This document is for informational purposes only and does not constitute financial advice. DeFi participation carries risk of partial or total loss of funds. All parameters are subject to governance approval.
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