Popular Use Cases
Here are some use cases that Kairos will be able to support
Popular Use Cases
Kairos enables a wide range of interest rate strategies — from simple hedging to sophisticated structured products. Because Kairos markets are oracle-agnostic and support up to 5,000x capital efficiency, participants can express views on virtually any onchain or offchain rate with minimal collateral. Below are detailed use cases illustrating how different market participants can use Kairos interest rate swaps.
Yield Farmer: Leveraged Yield Token Exposure via Pendle + Kairos
A Pendle user could purchase a yield token (YT) for a specific rate on Pendle and then use the YT as collateral in a Kairos market that references the same underlying rate to purchase a floating-rate swap. The user would then have leveraged exposure to the YT, receiving both the native yield from holding the token and the net difference between the current floating rate and the fixed rate of their swap.
Example — sUSDe Yield Token + Kairos Floating Swap:
A trader purchases Pendle YT-sUSDe expiring in 90 days at an implied yield of 8%. They deposit the YT as collateral into a Kairos market referencing Ethena's sUSDe staking rate and purchase a 90-day floating-rate swap on $500,000 notional, paying a fixed rate of 8% and receiving the floating sUSDe rate.
If sUSDe yields rise to 12% over the swap term, the trader earns the YT yield (which appreciates as realized yield exceeds the implied rate at purchase) plus the swap profit of roughly 4% annualized on $500,000 notional — approximately $4,932 over 90 days. The combined position creates a leveraged long bet on sUSDe yields rising, funded by minimal collateral.
If yields instead fall to 5%, the YT declines in value and the swap generates a loss (paying 8% fixed while receiving only 5% floating). The trader faces compounding downside, making this a high-conviction strategy best suited for participants with strong directional views on yield movements.
ETH Staker: Locking In a Fixed Staking Yield
ETH staking currently yields roughly 2.8–3.5% APY, but this rate fluctuates with validator participation, network activity, and MEV dynamics. A staker who has committed significant capital to validators — or who holds liquid staking tokens like stETH, cbETH, or rETH — faces uncertainty about what they'll actually earn over the next year.
Example — Solo Validator Operator Hedging Yield Decline:
A validator operator running 10 validators (320 ETH staked, worth roughly $640,000 at $2,000/ETH) currently earns ~3.2% APY. They're concerned that increasing validator participation — the entry queue has surged, with over 1.3 million ETH pending activation — will compress base rewards further over the next 12 months.
The operator deposits collateral (ETH or a stablecoin, depending on the market) into a Kairos market referencing the ETH staking rate and enters a 12-month swap on $640,000 notional, receiving a fixed rate of 3.0% and paying the floating ETH staking rate.
If the staking rate declines to 2.2% as validator count grows, the operator's actual staking income drops — but the swap generates a profit of approximately 0.8% on $640,000, or roughly $5,120 over the year. This offsets the lost staking income. Conversely, if a spike in network activity or MEV pushes the staking rate to 4.0%, the operator earns more from staking but pays the difference on the swap. The net effect is a smoothed, predictable yield close to 3.0% regardless of rate movements.
Example — Liquid Staking Token Holder Converting to Fixed:
A DeFi participant holds 100 stETH (worth ~$200,000) earning a variable ~3.0% from Lido. Rather than accept rate volatility, they deposit a portion of their stETH as collateral into a Kairos market and enter a 6-month swap on $200,000 notional, receiving fixed at 2.9% and paying the floating stETH rate.
For the next six months, the holder knows they'll net approximately 2.9% annualized on their position, regardless of whether Lido's rate dips to 2.0% during a quiet period or spikes to 4.5% during a fee surge. The swap converts their variable staking income into predictable fixed income — a building block for treasuries, funds, or individuals who need certainty.
Mortgage Holder: Profiting from Rate Declines
A homeowner holds a mortgage with a fixed rate of 6.5%. They believe interest rates will decline over the coming year — perhaps due to expected central bank rate cuts — and want to profit from that view without refinancing, which carries closing costs and paperwork.
Example — Hedging Against a SOFR-Referenced Rate:
The homeowner deposits $2,000 in collateral into a Kairos market referencing the SOFR (Secured Overnight Financing Rate) and purchases a 12-month swap on $400,000 notional, paying the floating SOFR rate and receiving a fixed rate of 5.0%.
Over the next year, SOFR declines from 5.0% to 3.5% as the Federal Reserve cuts rates. The homeowner is paying the declining floating rate (averaging roughly 4.2% over the year) while receiving the locked-in 5.0% fixed rate. On $400,000 notional, this ~0.8% average spread generates approximately $3,200 in profit over the year. The homeowner can apply these funds toward mortgage payments, effectively reducing their borrowing cost.
If rates instead rise, the homeowner pays more on the floating leg than they receive on the fixed leg, generating a loss on the swap. However, this loss is bounded by collateral, and the homeowner's underlying mortgage payment remains unchanged — making this a defined-risk bet on the rate direction.
Lender: Hedging Fixed-Rate Loan Exposure
If a lender offers a 10% fixed rate for two years via Morpho V2 while variable rates trade around 7%, they face interest rate risk if market conditions change. Should rates rise to 11% one year later, the lender continues earning 10% while new loans price at the higher market rate, causing the market value of their fixed-rate position to decline. The lender is effectively locked into an underperforming asset.
Kairos enables lenders to hedge this exposure through interest rate swaps.
Example — Morpho V2 Fixed-Rate Loan Hedge:
Following loan origination of a $1,000,000 two-year fixed-rate loan at 10%, a lender enters a 2-year Kairos swap agreement, paying a fixed rate of ~8% while receiving the variable rate tied to Morpho Market A.
If rates rise to 11%: The loan continues generating 10% returns, but the swap produces a ~3% gain (receiving 11% floating, paying 8% fixed). This 3% swap profit on $1,000,000 notional — roughly $30,000 per year — compensates for the opportunity cost of being locked into a below-market 10% loan when new originations price at 11%.
If rates decline to 5%: The swap generates a loss (receiving 5% floating, paying 8% fixed), but the lender's 10% fixed-rate loan is now significantly above market. The increased market value of the loan offsets the swap loss. In either scenario, the lender's total return is smoothed and protected.
This mechanism allows lenders to capture rate increases without affecting borrower terms, and is the fundamental technique that enables fixed-rate lending at scale — the same approach banks have used in traditional finance for decades, now available permissionlessly onchain.
Restaking Participant: Managing Layered Yield Exposure
The Ethereum restaking ecosystem — led by EigenLayer ($15.3B TVL) and Symbiotic ($897M TVL) — allows stakers to earn additional yield by securing Actively Validated Services (AVSs) on top of their base ETH staking rewards. However, restaking yields are highly variable: AVS demand fluctuates, reward token emissions can change, and the base ETH staking rate itself moves.
Example — EigenLayer Restaker Locking In Combined Yield:
A restaker has deposited 500 ETH (~$1,000,000) into EigenLayer and is earning a combined yield of approximately 5.5% (3.0% base staking + 2.5% restaking rewards). They want to lock in this yield for six months to plan around a known capital deployment.
The restaker enters two Kairos swaps: one referencing the ETH staking rate (receiving fixed at 2.9%, paying floating) and a second referencing a restaking rewards rate oracle (receiving fixed at 2.2%, paying floating). Together, these two swaps convert the restaker's variable ~5.5% combined yield into a predictable ~5.1% fixed income stream for six months.
If either the base staking rate or restaking rewards decline — say, base staking drops to 2.2% and restaking rewards dry up to 1.0% — the restaker's actual income falls, but the swaps generate offsetting profits. The restaker nets approximately 5.1% regardless.
Stablecoin Yield Trader: Speculating on Lending Rate Movements
A trader notices that Aave USDC supply rates have been compressing — currently at 4.5% — but believes an upcoming wave of leveraged trading activity will push borrow demand (and therefore supply rates) significantly higher.
Example — Going Long on Aave USDC Rates:
The trader deposits $3,000 USDC as collateral into a Kairos market referencing the Aave USDC supply rate and enters a 30-day swap on $1,500,000 notional (500x leverage), paying a fixed rate of 4.8% and receiving the floating Aave USDC rate.
Over the next 30 days, a surge in leveraged ETH positions drives Aave USDC borrow demand sharply higher. The average floating rate over the period is 9.2%. On $1,500,000 notional over 30 days, the 4.4% spread (9.2% received – 4.8% paid) generates roughly $5,425 in profit — a return of over 180% on the $3,000 collateral in a single month.
If rates instead decline to 3.0%, the trader pays 4.8% and receives 3.0%, losing approximately $2,219 over the 30-day term. The loss is bounded by the posted collateral, subject to liquidation thresholds.
This is the "perps-style UX for rates" that Kairos enables: leveraged directional bets on interest rate movements, with a familiar long/short interface and defined risk.
DAO Treasury: Converting Variable Protocol Revenue to Fixed Income
A DAO earns protocol revenue denominated in a variable yield — for example, lending protocol fees that fluctuate with utilization, or staking rewards that vary with network conditions. The DAO's contributors and grant recipients need predictable budgets, but the treasury's income is anything but predictable.
Example — Lending Protocol DAO Stabilizing Revenue:
A lending protocol's treasury holds $5,000,000 in assets deployed across its own markets, earning a variable yield currently around 6%. The DAO needs to commit $250,000 to a 12-month developer grant program and wants certainty that the funds will be available regardless of rate movements.
The DAO enters a 12-month Kairos swap on $5,000,000 notional, receiving a fixed rate of 5.5% and paying the floating rate tied to its own lending market's supply rate. This guarantees approximately $275,000 in fixed income over the year — more than covering the grant commitment — even if a bear market crushes utilization and the floating rate drops to 2%.
The trade-off is that if rates spike to 10%, the DAO pays the difference on the swap and foregoes the upside. But for budget planning purposes, the certainty is worth more than the optionality.
Digital Asset Treasury (DAT) Company: Issuing Fixed-Rate Bonds Backed by Staked ETH
A DAT (such as a publicly traded company following a digital asset treasury strategy) purchases a large amount of ETH and stakes it, receiving liquid staking tokens in return. The DAT then uses these liquid staking tokens as collateral in a Kairos market referencing the ETH staking rate and enters a long-duration swap — locking in a fixed yield payment for two years while paying the fluctuating staking rate.
Example — Structured ETH Bond Issuance:
A DAT acquires 5,000 ETH (~$10,000,000) and stakes it via Lido, receiving stETH. The stETH earns a variable ~3.0% staking yield. The DAT enters a 2-year Kairos swap on $10,000,000 notional, receiving a fixed rate of 2.8% and paying the floating ETH staking rate.
The DAT now holds a fixed-income instrument: $10,000,000 in staked ETH producing a guaranteed 2.8% annual return ($280,000/year) regardless of staking rate volatility. Backed by this predictable cash flow, the DAT issues fixed-rate bonds to investors at 2.5%, pocketing the 0.3% spread. The bond proceeds fund additional ETH purchases, creating a flywheel.
Investors in these bonds receive predictable, ETH-denominated yield exposure without needing to manage staking infrastructure, validator risk, or rate volatility. The DAT has effectively created an onchain fixed-income product — a category that barely exists in DeFi today but represents a multi-trillion-dollar market in traditional finance.
RWA Rate Speculator: Trading Offchain Benchmark Rates Onchain
Because Kairos is oracle-agnostic, markets can reference offchain rates like SOFR, EURIBOR, or other RWA (Real World Asset) benchmarks. This opens the door for crypto-native traders to take positions on traditional interest rate movements without ever touching the traditional financial system.
Example — Trading the Fed Rate Decision:
A trader expects the Federal Reserve to cut rates by 50 basis points at the next FOMC meeting. They deposit $5,000 in collateral into a Kairos market referencing SOFR and enter a 90-day swap on $2,000,000 notional, paying the floating SOFR rate and receiving the current fixed rate of 4.8%.
The Fed cuts by 50bps as expected, and SOFR drops from 4.8% to 4.3% over the following weeks. On $2,000,000 notional, the average 0.4% spread over 90 days generates roughly $1,973 in profit — a ~39% return on collateral.
This trade is analogous to a Fed Funds futures position in traditional finance, but executed entirely onchain with crypto collateral, instant settlement, and no counterparty credit risk beyond smart contract risk.
Composability: ERC-721 Swap Positions as DeFi Building Blocks
Every Kairos swap position is represented as an ERC-721 NFT, making it composable with the broader DeFi ecosystem. This enables use cases that go beyond simple rate trading.
A profitable swap position can be used as collateral in lending protocols, allowing the holder to borrow against unrealized swap gains. Swap positions can be bundled into structured products — for example, a vault that aggregates multiple swap positions across different rate markets to create a diversified fixed-income portfolio. Swap NFTs can also be traded on secondary markets, enabling price discovery and liquidity for rate positions before their natural expiration.
This composability is what transforms Kairos from a standalone trading venue into an infrastructure layer for onchain fixed income — the same role that interest rate swaps play in traditional finance, but natively interoperable with every other protocol in DeFi.
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