Why Crypto Needs Interest Rate Swaps | Thomas Lefort

Thomas Lefort is co-founder of Exponent, a Solana-based interest rate swap protocol built with Valentin, his former colleague from Squads. Lefort came from traditional finance and private banking before entering crypto in 2021. The core motivation for building Exponent was the absence of fixed-rate lending products on Solana, where borrowing rates for USDC against SOL reached as high as 30% during the 2023 to 2024 DeFi renaissance, leaving portfolio managers with no way to hedge or express a view on rates.

Exponent V1 used a yield stripping model similar to Pendle, splitting yield-bearing assets into a principal token trading at a discount and a yield coupon token for directional rate speculation. V1 launched markets for Kamino USDC and Marginfi USDC but those underperformed due to capital efficiency problems. The protocol found stronger traction with more volatile rate markets, including restaking assets, points-bearing assets, and RWA assets like Solstice and ONYC, whose rates are by nature more variable and therefore more useful to hedge or speculate on.

The central use case Lefort describes is segmenting the market by risk preference. Large asset managers and institutions want fixed rates for portfolio construction and cannot tolerate yields that fall 30% in a quarter, while smaller speculative users can take the other side of those trades to earn higher returns. Without interest rate swaps, portfolio managers are simply letting the market decide their yield. Lefort draws a direct comparison to traditional finance, where interest rate swap markets run into the trillions in notional value, while the category remains niche in crypto.

Exponent V2 is described as almost an entirely new protocol rather than an incremental upgrade. It will launch the first fully on-chain limit order book for rate trading on Solana, which Lefort says is more capital efficient than the AMM model used in V1. V2 will also introduce strategy vaults giving retail users one-click access to interest rate swap strategies that are currently too complex to execute manually. A flagship strategy involves swapping a floating rate asset like USX for a fixed rate on Exponent and then borrowing against that position on Kamino, with V2 also enabling users to hedge borrow rates so the overall position becomes more predictable on both sides. A Source USX vault and an ONYC vault allocating USDC across Exponent fixed rate markets, Kamino looping, and Loop Scale lending are both planned. Org-A-Way X is both an investor in and a curator at V2 launch. Lefort is targeting a launch around May 27th, with new asset issuers planned to come onto the platform in June and July.

Lefort positions Exponent as serving two distinct segments: asset issuers seeking on-chain distribution and on-chain capital seeking yield for portfolio construction. He notes that asset issuers today evaluate the protocol stack rather than the chain when deciding where to launch, and Exponent's goal is to be the platform where issuers list first. He explicitly states V2 has a different positioning from Pendle and is not attempting to replicate it. Post-launch go-to-market strategy focuses on onboarding large asset managers and institutions active in DeFi, several of which Lefort says have been waiting for the new products before committing capital.

On security, Lefort states that working with good auditors is very expensive but necessary, and that security is a continuous effort rather than a one-time activity. He notes the industry is increasingly seeing attacks on the human side through phishing and exploitation of personnel rather than pure smart contract vulnerabilities. Exponent builds all vault products with transparent on-chain code so users can directly inspect protocol exposure, asset exposure, and the constraints on what a vault manager can do, rather than relying on a fact sheet as in traditional finance. Lefort also cautions that misleading users into thinking a product is risk-free makes it difficult to retain them if losses occur.

Lefort's stated measure of success is becoming the largest holder across all on-chain yield markets and owning the largest yield markets across all blockchains within the next year. He argues that if Exponent wins the distribution game on Solana it would by extension win the largest issuance across all blockchains, given Solana's scale. He places responsibility for growing on-chain yield markets with protocols like Exponent rather than with blockchain foundations, and frames RWA assets as the primary driver of future expansion in on-chain yield, expecting native yield markets such as lending and staking to grow more slowly by comparison.