When it comes to on-chain lending, there's one unavoidable question: why does everyone want fixed interest rates but find it so difficult to obtain them?

This isn't a technical issue; it's a tug-of-war between the interests of the lender and the borrower.

Borrowers' demands are actually quite simple—they want predictable costs. Looking over the long term, whether it's for long-term positions or expanding productive capital allocation, floating interest rates are like a ticking time bomb. You can't accurately forecast cash flows, and financial models are full of variables. Once the benchmark interest rate rises, highly leveraged projects may quickly become unsustainable. The traditional private debt market has already proven this: companies, funds, real estate developers—they all prefer fixed interest rates because it allows them to lock in expectations, simplify budgeting, and hedge against refinancing risks.

Lenders' perspectives are completely opposite. Under a floating rate model, they benefit just by sitting back. The interest rate benchmark plus a credit risk premium means that when market rates rise, their profit margins automatically expand, and duration risk is lower. Especially during rate hike cycles, they continuously capture additional gains. So unless you can effectively hedge the interest rate risk for lenders or offer them sufficiently high risk premiums, they simply won't proactively provide fixed interest rates.

Here's the problem: **Fixed interest rates are essentially a cost product, not a natural market phenomenon.** They exist mainly because the demand for certainty from borrowers is strong and persistent enough to motivate lenders to step out of their comfort zone.

The implications for DeFi are clear. If there isn't a clear and lasting demand on-chain for "interest rate certainty," the fixed-rate lending market will struggle to accumulate liquidity, scale up, and sustain itself. The current dominance of floating rates indicates that this demand for certainty hasn't been fully activated on-chain—or, put differently, there aren't enough borrowers willing to pay for this certainty.