Timeswap Launches V3, One of DeFi’s Most Capital-Efficient Composable Primitives

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Alyssa Davidson

Posted: January 15, 2025 4:16 AM Updated: January 15, 2025 4:16 AM

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Edit and fact check date: January 15, 2025, 4:16 AM

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Timeswap, an oracle-free lending and borrowing protocol, announced the launch of V3, designed to be the most capital-efficient and composable native protocol in decentralized finance (DeFi). The protocol allows the creation of time-based financial products, including loans, borrowings, yield trading, and options, leveraging the same underlying liquidity.

One of the key features of Timeswap V3 is integrated liquidity across maturities. The protocol integrates liquidity across multiple periods, eliminating the fragmentation common in traditional fixed-duration products. For example, instead of maintaining separate pools for different maturities – weekly, monthly, quarterly, etc. – Timeswap V3 consolidates them into a single structure. This innovation improves liquidity, reduces slippage, and simplifies asset management for users.

At the core of Timeswap V3 is the Time Bound Token (TBT) protocol, which divides token ownership into specific time periods. This provides precision in yield control, allowing users to own or trade yields over a defined period of time. It also provides strategic flexibility, enabling advanced financial approaches such as yield stripping and time-based borrowing. The protocol’s efficiency in market dynamics utilizes a unified token structure to streamline trading and liquidity provision.

Additionally, Timeswap V3’s hook architecture enables seamless support for a variety of assets, including real-world assets such as high-yield tokens, governance removals, and lease agreements. This flexibility encourages innovation, giving developers the tools to build custom financial solutions on the platform.

Another standout feature is the AMMB liquidity model, which combines the automation of an Automated Market Maker (AMM) with the accuracy of its order book. Liquidity providers (LPs) can optimize their returns by setting their own interest rate spreads. LP distributes positions over fixed buy/sell rates, similar to limit orders, allowing users to switch between periods with minimal fees and slippage.

Unlike traditional AMMs that use fixed or dynamic fees, Timeswap V3 allows LPs to define their own fees within each pool. This flexibility prevents toxic flows, deepens market liquidity, and is consistent with LPs’ strategies.

Potential real-world applications of Timeswap V3

One of the main real-world applications of Timeswap V3 is the currency markets. V3 aims to be the most capital-efficient money market in DeFi, leveraging concentrated liquidity to provide customizable curves for unique assets such as Liquid Stake Tokens (LSTs), quasi-assets, and yielding assets. Hook-based architecture allows you to seamlessly integrate different asset types and strategies without requiring custom implementations for each. V3 also makes it possible to build custom financial products, including clearing similar to traditional money markets.

V3 can also be applied to yield trading. TBT allows users to trade future returns at a lower cost of capital, allowing them to exchange short-term returns for long-term asset management.

Additionally, Timeswap’s design essentially mimics an options structure, where a lender effectively sells a put option to a borrower. This product and liquidity can be expressed as an options exchange through the user interface (UI), providing detailed information such as Greeks, implied volatility, option chain, etc.

All three applications can be built using integrated liquidity, improving capital efficiency. Most importantly, with Timeswap V3, the platform is now positioned to compete directly with existing protocols such as AAVE and MORPHO. This was previously unfeasible due to inefficiencies in Timeswap V2.