B. Preliminary Work

The design of the Mortonn Yield Protocol is heavily influenced by other projects on the BNB blockchain, which offer synthetic assets, lending, leveraged trading, and more. The main difference from other protocols is that its interest rate is determined by the market-determined implied interest rate rather than a governance or formula-set rate. Additionally, while most lending protocols use floating interest rates, the Yield Protocol offers fixed-rate term loans while maintaining a degree of flexibility. Due to these properties, the Yield Protocol can provide unique insights into the interest rate term structure of on-chain loans.

Synthetic asset systems create tokens pegged to target assets but backed by different collateral assets. These synthetics should trade at par with the target asset (which usually requires some interest rate, typically set by the relevant parties' governance or agreement). In contrast, Mor prices are expected to float, and the interest rate implies that they trade at a discount.

As a system that allows users to deposit assets for lending and paying interest, as well as collateralizing their loans, on-chain lending protocols offer a formula-determined floating "overnight" interest rate that can be withdrawn at any time. In contrast, the Yield Protocol's interest rate is determined by the bond token's market price. If holders hold bonds periodically, they can achieve predictable interest rates, but early "withdrawing" requires selling fixed bonds on the market, which may result in losses. Additionally, the Yield Protocol allows users to enter collateralized loans with fixed terms and interest rates. Trading lenders and borrowers are matched separately.

With the improvement of the user experience in cryptocurrencies year by year, we expect more and more users to use cryptocurrencies and Mortonn-based applications in the days to come.