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When it comes to DeFi, most people's first reaction might still be meme coins, market making, and Perptual Futures, and almost no one would think of "interest rate swaps," a tool from TradFi. However, there is a project called Rho on @arbitrum that is focusing on this niche area and has quietly built up a considerable size.
Rho's idea is actually quite interesting: in TradFi, interest rate swaps represent a massive market (around 700 trillion USD), where institutions use them to hedge against interest rate fluctuations, lock in returns, or purely speculate on directions. In DeFi, there are similar 'interest rates': for example, borrowing rates, staking yields, Perp funding rates, but previously no one used these rates to create derivatives. The founder of Rho was originally a trader dealing with structured products, and upon seeing this gap, they jumped right in.
Rho's products currently support this type of on-chain "Interest Rate" derivative trading. For example, if you want to lock in a staking annualized yield of 18%, you can hedge against future fluctuations on Rho. Or if you believe that the upcoming perp's funding rate will soar, you can also use it to speculate and go long on the rate. This kind of play is actually similar to traditional financial tools, except that the underlying has changed to those yields on the chain.
As for why they chose to launch on Arbitrum, the founder stated it quite directly: Arbitrum itself is already the Layer2 with the highest DeFi activity, with many projects and users, and transactions are cheap and execution is fast, making it the most suitable for running such "complex yet unadorned" products.
Rho's cumulative trading volume has now surpassed the 10 billion USD mark, and it is expanding its product line, with plans to integrate more chains and develop more interest rate-related tools. I believe that although this project is not "lively," it truly provides a more mature toolkit for Decentralized Finance, especially in an era where institutionalization and specialization are becoming increasingly evident. Projects like Rho, which are "infrastructure" type, are very likely to be the underlying players in the next cycle. It has a leaderboard event on @KaitoAI!!