Decentralized finance protocol Voltz now allows Avalanche users to trade interest rate swaps of the Secured Overnight Financing Rate (SOFR), a benchmark dollar rate used throughout the global economy.
The new feature allows investors to hedge their exposure to interest rate changes and speculators to bet on whether the rate will go up or down, according to a May 24 announcement from Voltz seen by Cointelegraph.SOFR is the interest rate on overnight loans paid by institutions when they use United States Treasury bonds as collateral.
It was created to replace the older London Interbank Lending Rate (LIBOR). Because loans secured by Treasury bonds are considered very low risk, SOFR is often used as a benchmark to calculate other rates.
SOFR is heavily influenced by the Federal Funds Rate set by the Federal Reserve.In traditional finance, companies have used interest rate swaps based on SOFR for years to help protect themselves against rate fluctuations.Read more on cointelegraph.com