How it Works
The Opportunity
DeFi has surpassed $40B in outstanding loans, nearly all at variable rates. The missing primitive is an interest rate swap market. In TradFi, swaps enable lenders to offer fixed rates by hedging their floating exposure, forming the backbone of fixed-income markets. Kairos is built to fill this gap onchain, enabling lenders to hedge fixed-rate loan exposure, builders to create fixed-income products with predictable cash flows, and traders to take leveraged directional positions on rate movements. Kairos LPs are the counterparty to all of this activity, earning a risk premium and utilization fee on every swap they back.
Interested?
Please take 2 minutes to fill out the Kairos Liquidity Provider (KLP) interest form
Kairos Protocol
Kairos is a non-custodial, permissionless interest rate swap protocol deployed on Ethereum. Buyers lock in a fixed or floating rate for a defined term; the LP pool takes the opposing side. Both parties post collateral when a swap is purchased as a guarantee of future payments. At settlement, each party's payment is calculated as notional × rate × term, and only the net difference between the two legs changes hands, keeping capital requirements efficient. Because swaps are fully synthetic, they enable leveraged rate exposure without requiring principal exposure to the underlying asset.
How LPs Make Money
LPs earn two fee components on every swap: a risk premium, which compensates for uncertainty in the base rate (an oracle-provided projected TWAR during the swap tenor), and a utilization fee, which increases as pool utilization rises. Because swap pricing is oracle-derived rather than bonding-curve-based, LPs are not exposed to the arbitrage-driven adverse selection endemic to traditional AMMs. Margin requirements are fully deterministic, so the pool's maximum loss is capped per position.
LP Risk Management
Each market is single-sided (sell fixed or floating), so LPs can supply liquidity based on risk tolerance and directional views. As each swap is independently collateralized, the pool's maximum loss on any individual position is capped at its posted collateral for that swap. Bilateral liquidation is permissionless and evaluated in real time, keeping the protocol solvent without requiring active management from LPs. Market parameters including oracles, leverage multiplier, and fee curves are immutable at creation, reducing governance risk post-deployment.
Vault & Curator Layer
LPs can supply liquidity directly or through curated vaults. At launch, Morpho Vaults V2 are supported through a specialized adapter, so curators can allocate capital across markets and handle position management on behalf of depositors. Share pricing uses a bucketed mark-to-market system updated continuously as swaps open and settle. A share price floor and deposit block mechanism protect existing LPs from dilution when a pool is underwater.
Permissionless Market Creation
Anyone can create a market with custom oracles, collateral token, swap term, and fee parameters. LPs and curators can compete on pricing quality, creating natural selection toward well-calibrated markets that attract more volume and fee revenue. Market creators can earn a share of protocol fees generated by swap volume in their markets. An optional LP whitelist supports permissioned markets for institutional liquidity providers with compliance requirements.
View the Deck
Company
Kairos Labs, Inc. is backed by 6th Man Ventures, Lattice, Advancit Capital, and Alliance.
Legal Disclaimers & Risk Disclosures
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