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About Spectra

Spectra is an interest rate derivatives protocol for DeFi, with an easy-to-use flagship app.
Below, you'll discover Spectra, its key objectives, and powerful features.
These docs are non-technical. If you are looking for more technical / developer-friendly documentation, see the Developer Docs.
Spectra is an EVM-centric protocol for interest rate derivatives.
Its high efficiency and customizable design stand out, enabling builders and users to use its architecture for their needs. Composability and a permissionless approach are at the core of Spectra's design philosophy.

Key objectives:

  • Empowering the DeFi ecosystem with extensive tools focused on interest rate derivatives.
  • Invite projects of all sizes to leverage Spectra's features to serve their specific goals best.
  • Delivering cutting-edge features that can be seamlessly incorporated, built upon, and utilized by builders and other platforms in the DeFi ecosystem.
  • Upholding decentralization as a fundamental value, promoting community-driven growth via a DAO while the core team diligently and sustainably progresses the protocol.

Core Use-Cases:

  • Fixed Rate (Discounted Assets)
  • Variable Rates (Yield Trading)
  • LP Vaults (Liquidity Provision with up to 4 fee streams)
  • Upfront Yield
  • Borrowing/Lending with Principal tokens as collateral
  • Yield Marketplace (Trading of specific yield tranches)
*Given the Beta stage, not all features in the flagship app are available today.

Use Case Examples:

Fixed Rate - Secure fixed returns on your yield-generating position (Aave/Yearn etc.)
Example: if you supply 1000 USDC on Aave at 5% APR, the Fixed Rates tool allows you to lock in that rate for a set period. This way, even if the APR drops on Aave to 2.5%, your future earnings won't be affected - keeping your yield steady at 5%.
Variable Rates - Use Yield Token (YT) to trade and speculate on the change in APR, akin to traditional price trading.
Example: If you think the current 5% APR of Aave's USDC pool will increase due to market demand, you can purchase USDC-YT. A Yield Token is a derivative that offers exposure to the evolution of APR - not dissimilar from buying an AAVE token, exposing you to its price evolution.
Discounted Assets - Enabled by Principal Tokens (PTs), redeemable 1:1 with the underlying token at maturity.
Example: if you take 1000 USDC and use Spectra's Fixed Rates at 5% APR in the Aave pool, Spectra will mint the asset's corresponding 1050 Principal Tokens. This amount of PTs entitles you to redeem it for precisely 1050 USDC a year from now. In other words, a Principal Token is a discounted asset with a pre-defined future value. You can mint Principal Tokens and hold them until maturity to redeem 1:1 for the underlying token, sell in advance, or buy more PTs to increase your fixed-income position.
Upfront Yield - no need to wait months or even years for your future yield to materialize. Thanks to yield tokenization, you can receive it in advance.
Example: if you supply 1000 USDC on Aave at 5% APR, you can receive your future yield of ~50 USDC in advance, even instantly.
Liquidity Provision - Earn swap fees, yield, and incentives from your liquidity.
Liquidity providers are the foundation of every DeFi protocol, and Spectra is no different. By depositing their tokens to Spectra, liquidity providers can earn from swap fees and incentives while staying entitled to the yield of their interest-bearing tokens. It's a way for LPs to capitalize on the emerging trend of DeFi's interest rate derivatives.
Note that all the above are examples, and the outcome of your interactions with Spectra may vary depending on factors such as the maturity of the pool, current rates, or available liquidity.
Dive deeper into the world of on-chain interest rate derivatives in the following chapters, where you will learn more about yield tokenization, Principal & Yield Tokens, and detailed guides on how to get started.