This methodology document covers the Inter-Protocol Offered Rate (IPOR) index design description including the eligibility criteria and inclusion rules, the rebalancing rules and mechanics, analytics and pricing conventions, the weighting and aggregation rules and governance.
Keywords: Decentralized Finance, Lending protocols, Interest Rate Index
Table of Contents
The IPOR (Inter-Protocol Offered Rate) index is the interest rate benchmark that summarizes the (lending and borrowing) interest rates of multiple DeFi lending platforms as a way to capture the current state of the market. IPOR is a reference or benchmark rate that is publicly accessible. The index is a means for further expansion of the interest rate asset class in crypto and much needed products and services.
<aside> 💡 IPOR objectives: The benchmark index is designed to produce the average rate that represents the cost of borrowing or lending money in the rapidly expanding universe of decentralized finance (DeFi) in particular the secured collateralized market in a particular cryptocurrency for one block tenor (maturity).
DeFi: This DeFi universe consists of digital assets offering decentralized alternatives to traditionally centralized financial services. The capabilities of the underlying protocols include market making, lending, borrowing, liquidity and yield aggregation.
**Index description:** The index seeks to provide a near real-time measure for the interest rates in the broader crypto market.
**Index quote basis:** Weighted average of rates offered by constituent protocols.
**Market Standard:** The index is the market standard for fixed income investors in crypto seeking objective, rules-based, and representative benchmarks that also measure the market performance and risk characteristics. The index will hence provide the investor with a wealth of market information and help track the crypto asset class and market innovations.
**Benefits:** IPOR index summarizes information from the market in a quick and simple benchmark.
**Website**: [ipor.io](<http://www.ipor.io>)
**CUSIP/ISIN/Bloomberg Code**: TBA
**Ethereum Address:** TBD
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# Design principles
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💡 **Transparency:** open source calculation, the ability of anyone to re-create the calculations in a transparent and verifiable manner, and for the index itself to be publicly published as often as feasible accounting for gas fees.
**Adaptability:** given the free flow nature of DeFi innovation, it is therefore important to account for future changes to the index such as weighting, which protocols will be included, a methodology to remove protocols from the index, a way to govern the index into perpetuity (IPOR DAO).
**Modularity:** the ability to take different pieces and apply them to the index, that the index itself can be used for multiple purposes such as a reference for other types of assets such as an NFT marketplace referencing IPOR DAI for example to set a lending rate for a digital asset.
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## Off-chain and On-chain Design principles
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💡 **Data Sources:** Data for IPOR calculation is gathered from multiple data sources (and potentially from multiple blockchains).
**Charlie**: IPOR calculation is done off-chain following the methodology in this whitepaper, hence it can be calculated and verified independently (We call this component **Charlie**).
**IPOR Oracle:** IPOR is published on-chain under the **IPOR Oracle** smart-contract under the **heartbeat** principles (We call this component **Warren**).
**Heartbeat:** To optimize gas consumption IPOR is published based on an open set of rules decided by the DAO. These rules are triggers based on events (rate spikes, volatility, etc..) and time based (12 hours since last publication, etc...).
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## Summary
**Stable Coins:**
A different IPOR index per stable coin. Initially only DAI, USDT and USDC.
**Weighted Average:**