Term Finance Review

How Term Finance scores in DeFi protocols

This entry rates Term Finance, a non-custodial Ethereum protocol for fixed-rate, fixed-term loans against crypto collateral, in our DeFi protocols ranking. Rates are set in sealed-bid auctions, and since August 2026 Term V2 also lets borrowers and lenders post or take orders at their own rate. The basis is desk research of Term's documentation, its blog, its terms of use and its GitHub organization, checked on November 6, 2026. No loan was taken or offered. The category has five criteria, each marked 0 to 10 and weighted equally, as set out in our ratings methodology.

The overall score is the plain average: (8 + 2 + 6 + 6 + 4) / 5 = 26 / 5 = 5.2, up from 5.0 at the July 24, 2026 check. Three marks moved. What it does & fees rose from 5 to 8 because the fee pages now give the rates and a worked example; in July the amounts did not render. Audit disclosure fell from 9 to 6. The July review credited six audit firms; the audits page lists four, the latest core review is from November 2023, and nothing is listed for the V2 contract changes or Terminal 1 that went live in 2026. Governance & control rose from 3 to 4 under the governance scale applied across the category on November 6, 2026: a documented controller with no stated delay scores 4.

Strongest criterion

Fees stated with rates and a worked example (8)

Term charges borrowers two things. The servicing fee is "typically ranging from 0.30%-0.50% per annum", applied to the loan amount on an actual/360 basis and taken from the proceeds. The docs work an example: a 28-day, 100,000 USDC loan at 0.5% costs about 38.89 USDC. Liquidated damages are "typically set at 8%" of debt covered in a liquidation, split 5.2% to the liquidator and 2.8% to the protocol. The example states there are no fees to lenders, though borrowers price the fee into their bids. The mark is not higher because both figures are given as typical levels rather than fixed rates, and the V2 order-markets announcement states no fees of its own.

Weakest criteria

A non-commercial, no-derivatives licence (2): a deficiency

The core contracts repository carries Creative Commons Attribution-NonCommercial-NoDerivatives 4.0. That is not a software licence approved as open source, and it is stricter than the Business Source License: it never converts, and it bars both commercial reuse and modified versions. The category gives 2 for a licence that states non-commercial or no-derivatives terms. Derive and Synthetix score 0, because no public source exists for their live contracts.

Governance and control (4): a deficiency with a live incident

A Term blog post from April 2025 describes the split. The Term Foundation operates the protocol and initiates actions under the DEVOPS role, which covers "smart contract upgrades or changes to access controls"; TERM holders can veto them through a Protocol Veto Governor, and DAO fund moves through a Token Veto Governor. The pages opened give no veto window, quorum, multisig composition or timelock. On August 23, 2026 an attacker "targeted the governance of the affected vaults", Term's USDC and ETH vaults. Term's October 1 update says its direct fixed-rate lending contracts were not compromised. For the USDC pool it reports $987,095.52 recovered against $1,638,604.34 of recorded losses, and it says no stolen ETH has been recovered. Term has not published a root cause or a change to its controls on the pages opened. The category gives 4 where the controller is documented but no timelock or delay is stated, as for dHEDGE; a documented timelock with a bypass would score 5. This criterion scores that disclosure, so the exploit is reported here rather than scored, and the missing veto window and thresholds keep the mark at 4.

Audits that stop at 2023 for the core (6): partly a deficiency

The five core audits are dated and linked: Sigma Prime reviewed releases 0.1.0, 0.2.0 and 0.6.0, Runtime Verification checked the clearing algorithm, and Dedaub reviewed 0.4.0. ChainLight reviewed Blue Sheets in October 2024. The page lists nothing after that, although Term V2 changed the core contracts in August 2026 and Terminal 1 was announced in May 2026. That is a disclosure gap, not a finding that they went unreviewed. The mark sits below Derive's 7, which has a named audit of its current core.

Backing: on-chain collateral with known failure modes (6)

Borrowers lock collateral in the protocol when they bid, and positions below maintenance margin can be liquidated at once, with no margin call. If liquidations do not cover a loan, the docs say its Term Repo Tokens are redeemed at a haircut shared by all its lenders. Term's own blog documents an April 2025 tETH oracle error that caused unintended liquidations for 18 users, who were reimbursed. The mark stays at 6: the design is overcollateralized and on-chain, but no reserve or collateral dashboard was found and both incidents touched how collateral is valued or held. Our guide to how DeFi lending works explains margin ratios and liquidations.

What the score does not cover

The score measures disclosure, not returns or the quality of any vault curator. Term Repos are non-callable: borrowers cannot repay early and lenders cannot redeem before maturity, though Repo Tokens can be sold. A borrower who misses the repurchase window, typically 24 hours, defaults. Recovery for vault depositors depends on outstanding Repo Tokens repaying, and distributions were scheduled for October 2 and December 15, 2026. Our checklist for reading a DeFi lending market covers what to check before lending.

Term Finance vs Maple Finance and Derive

Maple Finance, the other fixed-rate lender rated here, scores 7.0. The two tie on fees (8). Maple leads on licence (5 against 2), audits (10 against 6), backing (7 against 6) and governance (5 against 4), because its audit archive runs to October 2026 and its timelock is documented. Derive also scores 5.2; it is listed first only because ties are ordered alphabetically. Term leads on licence (2 against 0), because Derive has published no source for its live contracts, and on backing (6 against 5). Derive leads on fees (9 against 8), audits (7 against 6) and governance (5 against 4).

Who it suits

On these marks, Term Finance suits borrowers and lenders who want a fixed rate for a fixed term, set by auction or order, and who can hold a position to maturity. It suits less well depositors who need open-source code, recent audits of the current release, or published governance parameters. Governance and audits are the criteria most likely to move at the next check.