The puzzle of why fixed-rate lending stalled in crypto markets deserves a closer look.

On paper, it sounds reasonable—lock in a rate, eliminate uncertainty. Yet across DeFi protocols and lending platforms, variable rates dominate while fixed-rate products gather dust. What gives?

First, volatility kills predictability. Traditional finance works with stable underlying assets; crypto moves 10% in a day. Lenders demanding fixed rates struggle to price risk accurately. Borrowers won't pay rates high enough to compensate for that uncertainty. It's a mismatch neither side wants.

Second, speed matters more than certainty in crypto. Users rotate capital constantly—jumping between yield farming, staking, trading. They need flexibility to exit positions quickly. A fixed-rate commitment feels like a chain, not protection. Variable rates offer that exit ramp.

Third, the math gets messy with liquidations. Smart contracts need to enforce repayment, and liquidation risks shift continuously as collateral prices swing. Fixed terms create edge cases lenders would rather avoid. Variable mechanisms adapt on the fly.

Finally, liquidity concerns real. Fixed-rate pools fragment the market, making it harder to find counterparties at rates that actually work. Everyone clusters around variable products simply because that's where the depth is.

The crypto market essentially revealed what borrowers and lenders actually want: maximum flexibility over maximum certainty. Fixed-rate lending assumed traditional finance logic would translate—it hasn't. The industry adapted, and variable rates won.