Interest Protocol
About
Interest Protocol is a decentralized banking protocol on Ethereum that applies fractional reserve banking to DeFi. It issues USDi, an over-collateralized stablecoin pegged to $1 that automatically accrues yield without requiring staking or claims — users earn simply by holding USDi in their wallet. The protocol enables lending (depositing USDC to mint USDi), borrowing (taking out USDi loans against cross-margin vaults of multiple collateral assets), and permissionless yield generation from borrower interest payments distributed pro rata to all USDi holders.
Where Does Yield Come From?
How USDi yield is generated
Yield comes from borrowers paying interest on their USDi loans. The interest rate (borrowing APR) adjusts automatically based on the protocol's reserve ratio — that's the amount of USDC held in the protocol's reserve divided by the total supply of USDi. When reserves are low, the borrowing rate rises (this encourages people to deposit more USDC or repay loans). When reserves are high, the rate falls (making it cheaper to borrow).
How interest flows to holders
From the total interest paid by borrowers, the protocol takes a 15% fee (as set at launch). The remaining interest is shared among all USDi holders, each receiving an amount proportional to how much USDi they hold.
No staking or claiming needed
This distribution happens through a clever internal mechanism called a "global scaling index." Whenever any transaction changes the reserve ratio, the system automatically adjusts everyone's USDi balance upward to reflect the new yield. This means you earn just by holding USDi in your wallet — no need to stake, claim, or pay gas for each reward.
Extra yield possibilities
There may also be additional yield from IPT liquidity mining rewards, which are offered to people who provide USDi liquidity on decentralized exchanges (DEXs).
Why the design supports sustainable yield
The protocol uses a fractional-reserve banking model, meaning it can lend out more USDi than the USDC it holds in reserve (while keeping liquidity risk lower than full-reserve lenders). This structure helps keep borrower interest rates reasonable and depositor yield sustainable over time.
Persons
Jake Barber
Maintainer (gfx.cafe project member)
a (elee1766)
Owner (gfx.cafe project member)
Getty Hill
Developer (gfx.cafe project member)
Henry Han
Maintainer (gfx.cafe project member)
Christian Munsayac
Maintainer (gfx.cafe project member)
Jake Johnston
Maintainer (gfx.cafe project member)
Aly Bartulio
Developer (gfx.cafe project member)
Fermin 'Piscu' Carranza
GitHub contributor
Audits
| Audit / Date | Findings | Verdict |
|---|---|---|
Dedaub16-05-2022 |
| The audit found no critical, high, or medium severity vulnerabilities, and the team resolved all but one low-severity issue, indicating a well-secured codebase with manageable residual risks around gas scalability from the append-only collateral token list. |
| The one critical vulnerability was resolved, and several medium-severity issues were fixed, but many findings (particularly around pausing, front-running, insolvency risks, and governance design) were acknowledged and accepted by the project team without mitigation, leaving residual risk in the protocol's operational and governance model. |
Backers
No venture capital investors, funding rounds, or traditional backers are disclosed on the official Interest Protocol website, GitHub repository, Medium blog, or governance forums. The only external funding noted is a grant from Optimism's Grants Council awarded to GFX Labs (the development team behind Interest Protocol), announced on the governance forum in June 2024, intended to reward users who lock OP in their Interest Protocol vaults and delegate. No amounts or traditional investment rounds are mentioned.
Legal
Status and notes
No legal entity, operating company, or organizational form is disclosed on any official source (interestprotocol.io, governance forum, GitHub, Medium). The main website footer displays "Interest Protocol 2026" and links to "Terms of Use" (#/terms) but no imprint or legal pages exist. The governance forum (forums.interestprotocol.io) provides Terms of Service and Privacy Policy templates based on Discourse defaults, but they contain unfilled placeholders ("company_name", "governing_law", "city_for_disputes") — the operator of the forum is not named. The forum's contact email is [email protected]. GFX Labs (gfx-labs on GitHub) is the development team but no legal entity name, registration, or jurisdiction is associated with it in any official disclosure. No incorporated entity, foundation, association, or DAO legal wrapper is mentioned anywhere.