Web3 services platform Chainlink has launched the first market-wide interest rate product for the Web3 economy — the “CF Bitcoin Interest Rate Curve—in association with Chainlink” (CF BIRC).
Launched at SmartCon 2022 in partnership with cryptocurrency index provider, CF Benchmarks, CF BIRC is a replicable, market-representative, and manipulation-resistant base rate that will help remove uncertainty around crypto asset valuations while enabling increased capital efficiency and more predictable lending and borrowing across digital markets.
As adoption of DeFi increases and the Web3 economy continues to grow, with the combined market capitalization of digital assets reaching $1T, the infrastructure supporting the smart contract economy needs to keep pace with rising demand.
Meeting this demand, the CF Bitcoin Interest Rate Curve serves as a north star to help guide Web3 capital and provides a standard market gauge of current and forecasted Bitcoin interest rates.
Delivered on-chain as a Chainlink Data Feed, it helps financial institutions participate in digital asset markets and establishes a more robust foundation upon which digital asset derivatives markets can grow.
“Chainlink Data Feeds have helped establish DeFi as one of the most valuable markets in the world, and we are proud to partner with CF Benchmarks to help it reach greater maturity with the introduction of our industry-wide interest rate product,” said Sergey Nazarov, Co-Founder of Chainlink.
“With this data delivered reliably on-chain through the Chainlink Network, all market participants will be able to engage with the Web3 economy with greater certainty and in exciting new ways.”
Much like the Secured Overnight Financing Rate (SOFR), which is a measure of the cost of borrowing cash overnight, CF BIRC is foundational financial infrastructure designed to help propel Web3 toward its next wave of product innovation and adoption.
As a market-wide base rate for Bitcoin debt markets, CF BIRC allows participants, from OTC desk managers and derivatives traders to DeFi-native users and Web3 builders, to gauge the interest rates they are receiving and hedge against interest rate risk. Some of the specific benefits include:
- Transparency—Lenders and borrowers have the market benchmark available and can use it as a base rate when making market decisions.
- Consistency—The curve’s normalized methodology and daily rates introduce more consistency and predictability to the ebb and flow of digital asset markets.
- Clarity—Market participants can better quantify the risks of using certain protocols and products based on current and predicted baseline interest rates.
“‘The CF Bitcoin Interest Rate Curve—in Association with Chainlink’ is a first-of-its-kind offering and a major milestone for the crypto industry as a whole. We are thrilled to collaborate with Chainlink, the industry standard for securely delivering data on-chain, to provide a reliable and open-source data feed backed by a transparent methodology and on-chain inputs that anyone can verify,” said Sui Chung, CEO of CF Benchmarks.
“This base rate will help unlock innovation across lending and borrowing platforms, asset valuation models, swap markets, and other financial primitives.”
To ensure the curve is reflective of the Bitcoin lending market as a whole, The CF BIRC incorporates a wide range of data sources, including OTC lending desks, DeFi lending pools, and perpetual futures markets.
Underpinned by the combination of Chainlink‘s industry-standard infrastructure for delivering high-quality data on-chain and CF Benchmark’s years of experience producing reliable benchmarking data, CF BIRC is a public good for Bitcoin and DeFi markets upon which entirely new financial products and services can be built.
The CF Bitcoin Interest Rate Curve is built according to the same security and tamper-resistance standards as other Chainlink Data Feeds, which are currently helping to secure tens of billions of dollars of value across the smart contract economy.