What is Timeswap?

What is Timeswap?

What is Timeswap?

…and how do you make money on it?

Dapps & Protocols

·

10 min

What is Timeswap?

…and how do you make money on it?

Dapps & Protocols

·

10 min

What is Timeswap?

…and how do you make money on it?

Dapps & Protocols

·

10 min

What is Timeswap?

…and how do you make money on it?

Dapps & Protocols

·

10 min

What is Timeswap?

Unlock the power of time with Timeswap: a revolutionary protocol combining fixed yields, zero liquidation, and options trading. Dive into a world where lending, borrowing, and market-making collide, allowing you to earn fixed yields, leverage tokens, and create markets—all while avoiding the fear of liquidation.

Timeswap emerges as the ultimate solution to an existing problem in TradiFi: tackling the daunting challenge of fixed time preference. With Timeswap, users can manage their ERC-20 tokens seamlessly across discrete time intervals.


The journey of Timeswap started during the hot days of DeFi summer. At the time, Timeswap was just a concept of a decentralized money market.

To explain Timeswap, it is important to understand the concept of money markets. A money market is where short-term borrowing and lending of highly liquid and low-risk financial instruments take place. Here is where governments, banks and corporations trade safe instruments like Treasury bills, CDs, and government securities that mature in a year or less.

Money markets are like the backbone of the financial system. They keep things flowing smoothly, providing that much-needed liquidity and stability. They're a legit tool for central banks to work their monetary policy magic, and they give us regular folks a rad way to manage our cash and score some decent returns in the short run.

Timeswap was trying to achieve the same thing in 2020, but their idea was too complex to execute in a young DeFi ecosystem. Creating a money market required a scalable network, and tools that were still under development. Because Timeswap doesn't use KYC, they had to work out a permissionless money market.


Fast-forward to 2022, Timeswap V1 launched as a decentralized money market protocol on Polygon. It was a unique project that was immediately validated by traders. The first version of the protocol has done over $4M of lend/borrow/liquidity volume.

Interestingly, Timeswap has functioned without a glitch till date, and also proved the point that there is demand for money markets offering non-liquidatable loans in DeFi – what a surprise!

What makes Timeswap unique is that the protocol doesn't use oracles. As a result, there is no way for the protocol to be hacked by using oracle manipulation.

Hearing about a DeFi protocol that doesn't use oracle sounds quirky. Oracles are regarded as the main method for DeFi projects to update the correct prices for crypto assets. Instead of following the norm, Timeswap uses arbitration as the main mechanism for updating prices on the protocol. This creates an incentive for traders to rebalance the pool manually and pocket the difference on DEXs like Uniswap. 

How does Timeswap work?

Timeswap is a lending and borrowing DeFi protocol on Polygon. They are the first fully permissionless, oracle-less, non-liquidable, fixed maturity DeFi protocol. In simple terms, Timeswap aims to be the Uniswap of borrowing and lending. 

Put in the simplest terms, Timeswap functions as both a zero liquidation money market and an options market.

Explaining how Timeswap works will require diving into the math behind the protocol. The inspiration point for Timeswap is the constant product formula behind Uniswap (X*Y = K). To simplify, a computer algorithm calculates how much interest the lender will get and how much interest will borrow pay based on funds in the pool.

For Timeswap, the formula is X*Y*Z=K, where X is Principal Pool, Y is Interest Rate Pool, Z is Collateral Factor Pool, and K is the constant. X,Y and Z are the 3 variables that make non-liquidatable loans possible. Let's see the relation between them.


The Principal Parameter (X) determines the amount of assets which can be borrowed. Interest Rate Pool (Y) determines the maximum interest rate per second of the pool and the Collateral Factor Pool (Z) determines the minimum collateral debt position required to be locked up by borrowers. 

K has to remain constant so when any variable (X/Y/Z) changes, the other two variables re-balances so as to maintain the constant K. As a result of the constant product formula (K), lenders and borrowers will have the flexibility to change the variables based on their interest rate and collateral risk appetite. As an example, for borrowers wishing to borrow assets at a lower rate, it will require a higher amount of locked collateral whereas for lenders wishing to lend assets at a lower rate, it will result in a higher amount of insurance issued.

In this system, if the borrower defaults their collateral is distributed to the lenders. Meanwhile, lenders are fully sheltered in either scenario: the borrower pays back the full interest payments, or the collateral goes to the lender in case of a default. We will cover the liquidation mechanism in the following sections. 

In order to account for every transaction conducted on Timeswap, the protocol relies on its suite of six native tokens that represent the bond principal, bond interest, insurance principal, insurance interest, liquidity and the collateral debt position. 


Bond Principal Token (BPT)

A Bond principal token is issued to lenders who deposit assets into the Principal pool. BPTs are ERC20 tokens issued to the lenders as a receipt for depositing their assets into the principal pool.

Bond tokens account for the principal owed after maturity to the lenders. After maturity of the pool, BPT can be redeemed for the exact amount of underlying asset in the Asset pool (as long as there is a sufficient amount of the underlying asset present in the pool). There is no need to maintain centralized accounting with this system, and lenders benefit from a trustless setup.


For example, a user who owns 30 Bond principal tokens of a DAI-WETH pool expiring on 30–12–2023. Assuming that there are sufficient assets in the principal pool after maturity, the user can swap his tokens for 30 DAI after 30–12–2023.

Bond Interest Token (BIT)

A Bond interest token is issued to lenders to account for the interest receivable for redeeming BIT. As we can see, the interest and the deposited assets are separated into two different tokens.

To make sure that lenders have a unit of account for the interest receivable by them, BITs are issued. The owner of these BITs can then burn these tokens after the maturity of the pool to receive the interest due according to how many BITs they hold.

For example, suppose a user holds 20 BITs with a claim on a DAI-WETH pool expiring on 30–12–2023. After the maturity of the pool, the user can exercise their right to claim 20 DAI from the pool as interest payable to them.

Insurance Principal Token (IPT)

An Insurance principal token is issued to lenders to hedge against the default risk of borrowers. To protect lenders against defaulting borrowers, IPTs are issued in their favor as a receipt.

If for some reason, the BPTs fail to retrieve the equivalent amount lent out to the pool, the IPTs issued will make up for this by allowing the lender to claim insurance coverage on the collateral defaulted by the borrowers. This way, lenders are safeguarded against any default risk.

For example, suppose a user owns 1 WETH insurance coverage of a DAI-WETH pool expiring on 30–12–2023. Supposedly, the user was not able to realize 10% of his bond principal token claim. This means the lender can now claim 0.1 WETH collateral.

Insurance Interest Token (IIT)

An Insurance interest token is issued to lenders to hedge against the default risk of borrowers. Same as with the Insurance Principal Token, IITs are issued in the lender's favor as a safety mechanism.

If for some reason, the BITs fail to retrieve the equivalent amount lent out to the pool, the IITs issued will make up for this by allowing the lender to claim insurance coverage on the collateral defaulted by the borrowers.

For example, suppose a user owns 1 WETH insurance coverage of a DAI-WETH pool expiring on 30–12–2023. Supposedly, the user was not able to realize 10% of his bond interest token claim; this means the lender can now claim 0.1 WETH collateral.

Collateralized Debt Token (CDT)

A Collateralized Debt Token is issued to borrowers who deposit collateral and borrow assets from the pool. Issued to borrowers, this CDT is an ERC721 token, which is the standard format for NFTs. Every time someone borrows an asset, they are issued a CDT as a receipt for the debt they owe.

The CDT is also a redeemable token. The borrower has to pay back the debt before maturity to withdraw the collateral locked. If the borrower fails to pay the debt, the collateral is forfeited and distributed to the lenders.


For example, there is a user who owns a Collateralized Debt token of a DAI-WETH pool expiring on 12–30–2023 with 0.2 WETH locked as collateral against a debt of 340 DAI. If the user repays 340 DAI debt before 12–30–2023, the user can burn their collateralized debt tokens to withdraw the 0.2 WETH locked as collateral.

A nifty feature of being an NFT is that the CDT can be viewed on OpenSea. Since it’s an NFT, you can trade it as well. 

Liquidity Token (LT)

A Liquidity token is issued to the liquidity providers of the pool who add both assets & collateral. Liquidity providers receive ERC20 LTs as proof of their asset & collateral deposits into the pool. After maturity, these LTs provide a proportional claim over all the assets in the Principal pool & Collateral locked pool after the settlement process for lenders is accounted for.

This token functions similar to LP tokens anywhere else in DeFi, with LPs being able to withdraw their liquidity after the pool has matured. LPs, in return receive the transaction fees being paid by the lenders & borrowers.


For example, there is a DAI-WETH pool expiring on 30–12–2023 and a user has 10% of all the LTs from the pool. After accounting for all transactions and settlements, the pool is left with 1000 DAI and 2 ETH. The user will then receive 100 DAI and 0.2 ETH from the pool.

How to make money on Timeswap?

As a zero liquidation money market and options market, the main approach for making money on Timeswap is to view it as a decentralized version for trading options. In other words, users can simply take loans on the platform to increase their buying power, or sell their debt on the open market. Since loans on Timeswap have an expiry date, lenders can be sure they will be repaid at the deadline. 


Before you start using Timeswap, it is important to mention that the platform is in beta mode. Users are recommended to be cautious!

Timeswap Borrowing

The best thing about borrowing on Timeswap is that there is no liquidation like we see in other DeFi protocols. The borrowing amount and interest are based on the expiry date, and only then you have to pay back the interest. 


Here's how you borrow on Timeswap:

  1. Open the Timeswap app

  2. Choose the pool you want to borrow from the markets dashboard

  3. Before borrowing, you would have to approve the borrow contract by clicking on "Approve (name of token to borrow)"

  4. Insert the amount to borrow

  5. Click borrow & proceed to have your borrow position in the dashboard

  6. Once you've borrowed - your debt position will pop as active on the dashboard

Borrow positions on Timeswap need to be  repaid before maturity else you end up getting your collateral forfeited. You can close the borrow position by either repaying full or repaying partial amount.

Timeswap Lending

The end goal of lending on Timeswap is to earn interest on your capital. While the process is more complex under the hood, as a user, lending on Timeswap is as easy as with any other DeFi protocol.


Here's how you lend on Timeswap:

  1. Open the Timeswap app

  2. Choose the pool you want to lend from the markets dashboard

  3. Before lending, you would have to approve the lend contract by clicking on "Approve (name of token to lend)"

  4. Enter the amount to lend. Lend the asset.

  5. Once you've lent - a lend position will pop up in the dashboard

You can close the lend position i.e. withdraw your position before maturity but that comes at a cost since you're closing position on a fixed-term protocol. That's it! Now sit back, relax, and let the interest accumulate.


Ultimate Web3 Automation

A lil' more goodness

What is Arrakis Finance?

Dapps & Protocols

·

21 min

What is Saber Finance?

Dapps & Protocols

·

21 min

What is Balancer?

Dapps & Protocols

·

21 min

What is Status?

Dapps & Protocols

·

21 min

What is MuesliSwap?

Dapps & Protocols

·

21 min

What is Across Protocol?

Dapps & Protocols

·

21 min

What is SushiSwap?

Dapps & Protocols

·

21 min

What is Velodrome Finance?

Dapps & Protocols

·

21 min

What is Pangolin?

Dapps & Protocols

·

21 min

What is Metal?

Dapps & Protocols

·

21 min

What is Golem?

Dapps & Protocols

·

21 min

What is Orca?

Dapps & Protocols

·

21 min

What is Compound?

Dapps & Protocols

·

21 min

What is ROOK?

Dapps & Protocols

·

21 min

What is Mango?

Dapps & Protocols

·

21 min

What is Harvest Finance?

Dapps & Protocols

·

21 min

What is Enzyme?

Dapps & Protocols

·

21 min

What is Origin Protocol?

Dapps & Protocols

·

21 min

What is Frax Finance?

Dapps & Protocols

·

21 min

What is BENQI?

Dapps & Protocols

·

21 min

What is OpenSea?

Dapps & Protocols

·

21 min

What is iExec?

Dapps & Protocols

·

21 min

What is Yearn Finance?

Dapps & Protocols

·

21 min

What is Toros Finance?

Dapps & Protocols

·

21 min

What is LooksRare?

Dapps & Protocols

·

21 min

What is Elk Finance?

Dapps & Protocols

·

21 min

What is Yield Yak?

Dapps & Protocols

·

21 min

What is Quickswap?

Dapps & Protocols

·

21 min

What is Pool Together?

Dapps & Protocols

·

21 min

What is Multichain (Anyswap)?

Dapps & Protocols

·

21 min

What is Thales?

Dapps & Protocols

·

21 min

What is Crabada?

Dapps & Protocols

·

21 min

What is Abracadabra Money?

Dapps & Protocols

·

21 min

What is Sudoswap?

Dapps & Protocols

·

21 min

What is Injective Protocol?

Dapps & Protocols

·

21 min

What is Mixin?

Dapps & Protocols

·

21 min

What is 0VIX Protocol?

Dapps & Protocols

·

21 min

What is Swaap Finance?

Dapps & Protocols

·

21 min

What is BurgerCities?

Dapps & Protocols

·

21 min

What is Lyra?

Dapps & Protocols

·

21 min

What is Solend?

Dapps & Protocols

·

21 min

What is Mean Finance?

Dapps & Protocols

·

21 min

What is The Graph?

Dapps & Protocols

·

21 min

What is AAVE?

Dapps & Protocols

·

21 min

What is Gods Unchained?

Dapps & Protocols

·

21 min

What is Synthetix?

Dapps & Protocols

·

21 min

What is Gelato?

Dapps & Protocols

·

21 min

What is JustStable?

Dapps & Protocols

·

21 min

What is Aavegotchi?

Dapps & Protocols

·

21 min

What is RociFi?

Dapps & Protocols

·

21 min

What is Perpetual Protocol?

Dapps & Protocols

·

21 min

What is Linear Finance?

Dapps & Protocols

·

21 min

What is 0x Protocol?

Dapps & Protocols

·

21 min

What is Monolith?

Dapps & Protocols

·

21 min

What is Keep Network?

Dapps & Protocols

·

21 min

What is Dune Analytics?

Dapps & Protocols

·

21 min

What is Holochain?

Dapps & Protocols

·

21 min

What is Gnosis Safe?

Dapps & Protocols

·

21 min

What is StakeDAO?

Dapps & Protocols

·

21 min

What is 1Inch?

Dapps & Protocols

·

21 min

What is Angle Finance?

Dapps & Protocols

·

21 min

What is Magic Eden?

Dapps & Protocols

·

21 min

What is Pickle Finance?

Dapps & Protocols

·

21 min

What is dYdX?

Dapps & Protocols

·

21 min

What is Ellipsis Finance?

Dapps & Protocols

·

21 min

What is Decentraland?

Dapps & Protocols

·

21 min

What is Convex Finance?

Dapps & Protocols

·

21 min

What is Dfyn?

Dapps & Protocols

·

21 min

What is Rocket Pool?

Dapps & Protocols

·

21 min

What is Shiba Inu?

Dapps & Protocols

·

21 min

What is MakerDAO?

Dapps & Protocols

·

21 min

What is Penguin Finance?

Dapps & Protocols

·

21 min

What is Akropolis?

Dapps & Protocols

·

21 min

What is Francium?

Dapps & Protocols

·

21 min

What is Storj?

Dapps & Protocols

·

21 min

What is Saffron Finance?

Dapps & Protocols

·

21 min

What is Adamant Finance?

Dapps & Protocols

·

21 min

What is Raydium?

Dapps & Protocols

·

21 min

What is SundaeSwap?

Dapps & Protocols

·

21 min

What is Synapse?

Dapps & Protocols

·

21 min

What is Reserve?

Dapps & Protocols

·

21 min

What is Alchemix?

Dapps & Protocols

·

21 min

What is Ankr?

Dapps & Protocols

·

21 min

What is Apricot Finance?

Dapps & Protocols

·

21 min

What is Trader Joe?

Dapps & Protocols

·

21 min

What is Router Protocol?

Dapps & Protocols

·

21 min

What is Alpaca Finance?

Dapps & Protocols

·

21 min

What is Index Coop?

Dapps & Protocols

·

21 min

What is API3?

Dapps & Protocols

·

21 min

What is Band Protocol?

Dapps & Protocols

·

21 min

What is Hop Protocol?

Dapps & Protocols

·

21 min

What is Port Finance?

Dapps & Protocols

·

21 min

What is Augur?

Dapps & Protocols

·

21 min

What is Aragon?

Dapps & Protocols

·

21 min

What is BadgerDAO?

Dapps & Protocols

·

21 min

What is Uniswap?

Dapps & Protocols

·

21 min

What is Cometh?

Dapps & Protocols

·

21 min

What is Request Network?

Dapps & Protocols

·

21 min

What is Chainlink?

Dapps & Protocols

·

21 min

What is TrustSwap?

Dapps & Protocols

·

21 min

What is Set Protocol?

Dapps & Protocols

·

21 min

What is MeanFi?

Dapps & Protocols

·

21 min

What is Saddle Finance?

Dapps & Protocols

·

21 min

What is Axie Infinity?

Dapps & Protocols

·

21 min

What is Serum?

Dapps & Protocols

·

21 min

What is Bonfida?

Dapps & Protocols

·

21 min

What is Atlendis Protocol?

Dapps & Protocols

·

21 min

Stay in the loop

No spam, just certified good stuff

Stay in the loop

No spam, just certified good stuff

Stay in the loop

No spam, just certified good stuff

Stay in the loop

No spam, just certified good stuff

Stay in the loop

No spam, just certified good stuff