Introducing IPY – Speedometer for the New Financial System

Chaz Schmidt
Jul 14, 2021
|3 minutes read

Introducing Interest Per Year, or IPY for short, a new metric created by DeFi Pulse used to track the performance of DeFi lending markets. Imagine IPY like the speedometer for DeFi measuring the speed at which interest is accruing in DeFi lending protocols given the borrow rate and outstanding debt at that moment. IPY is useful for measuring the potential performance changes of lending protocols in the short term.

What’s truly fascinating about a metric like IPY is the fact that it isn’t possible without DeFi. In centralized finance, banks, financial institutions, and regulators control the flow of information. These authorities choose what information gets disclosed to the public. It’s not like you can walk into your bank and say, “I’m here to perform an audit.” But things are different with DeFi.

With DeFi, all the data is publicly available on-chain for everyone to see. Transparency and real time data are two major advantages DeFi has gained by rebuilding things from scratch. And it’s up to us as members of the DeFi community to decide how we want to synthesize the data and utilize those advantages.

It’s important to remember that DeFi lending is still maturing. Historically, the most popular form of collateral has been ETH. And, the most popular asset to borrow has been DAI. Lending rates have been highly correlated to the performance of this trading pair ETH/DAI. While rates may go up and down, outstanding debts have consistently risen over time. Additionally, as DeFi lending matures and new assets like securities, property, real estate, etc enter the picture, metrics like IPY will mature as well.

Interest Per Year is an example of what’s possible through DeFi. It’s a metric that can help market participants better understand the condition of DeFi lending markets. For example, DAI’s IPY is generally greater than USDC’s but USDC has a more stable IPY. This indicates that there is greater demand for DAI loans overall but USDC is carving out a niche for steady consistent lending returns.

Whether you want to analyze historical rates or simply stay ahead of trends in DeFi, the new DeFi Lending page makes it easier to spot patterns emerging in the market. Our new page supports a variety of assets including DAI, USDC, ETH, REP, ZRX, WBTC, and BAT with lending data from Compound, Maker, dYdX, and Fulcrum.

Witness the growth of DeFi lending markets firsthand

Decentralized Finance is still in its infancy. It’s a historic time for the industry and we’re about to witness events which will shape DeFi forever. In the days ahead, we’ll see more and more assets be introduced as collateral in DeFi. Not to mention, different lending models will emerge. And on top of it all, more and more people will experience borrowing or lending in DeFi for the first time. We hope DeFi Lending will give you the tools to capture history in the making.

Have a question or feedback about the new Lending page? Let us know what you think on Twitter or in our Discord.