Bloom Product Docs

Permissionless loans with Treasury-derived yields for the DeFi economy

Bloom is protocol that bring yields derived from the "risk free"(1) treasury bill rate into the DeFi landscape.

TBYs (Term Bound Yield) are tokens issued by the Bloom smart contract after the receipt of loand assets and which produce yields close to a 6 month treasury bill, but that are fully onchain and freely transferable and permissionless.

What problem does Bloom solve?

1) Access to yield derived from US Treasury Bills for Lenders.

Yields in major DeFi money markets have troughed and remained between 1-3.5% APR, struggling to keep up with the traditional debt markets. Compare this with treasury bill rates upwards of 5.5%, and consider the necessary risk premium for smart contracts and pooled token exposure, and it's no surprise lending TVL onchain has decreased considerably.

The "risk free" rate is typically defined as the interest rate the U.S. federal government is willing to pay lenders. Because they are often considered the lowest risk borrower in the market, the rest of the debt market naturally must pay a higher rate to reflect their entity's respective risk premium.

However, in DeFi, major money markets price rates based solely off of utilization. Utilization curves are non-reactive to external variables like the federal funds rate, at least directly. Of course, money may flow out of them towards the risk free rate, which would affect utilization. The problem with these utilization based curves is that to create a reasonable lend/borrow spread, yields can rarely exceed 3-4% for most stablecoins.

The second, and more important, problem, is that RWAs do not yet exist onchain in a meaningful and integrated capacity. The RWAs that do exist onchain require full KYC procedures, and once issued, are relegated to a siloed ecosystem of unused DeFi products that completely kneecap the utility of an asset being onchain.

It is our strongly held opinion that nearly all of the value of DeFi comes from boundless composability. Composability is the feature that unlocks hyper-scalability, insane potential returns, democratized access, and ultimately unlocks the power of DeFi.

Bloom is the first step to DeFi superiority, and the beginning of the end of the old ways.

1) Treasuries are debt obligations of the U.S. government, and because these obligations are backed by the "full faith and credit" of the government, they are generally considered one of the safest of all investments. However, even treasuries carry some credit risk. See the β€œRisk” section of these documents for additional information.

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