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  A money market is a market for short term loans. It consists of institutions or individuals who either have money to lend or borrow on a short-term basis. At the wholesale level,it deals with a large volume of trades between institutions and traders and at the retail level,it includes money market mutual funds bought by individual investors and money market accounts opened by bank customers.  INSTRUMENTS USED IN THE MONEY MARKET


Bill of exchange refers to an agreement between the debtor and the creditor. This document shows the indebtedness of the debtor to the creditor, and his intention to pay the debt on demand or after a stipulated period of time (normally 90 days).


A treasury bill is normally issued by the central bank of a country when they need to borrow money from the money market. Treasury bills or T-bills have a maximum maturity period of 364 days. You can buy treasury bills through a bank or a broker. Use treasury bills to:

  • Diversify your investment portfolio
  • Participate in a secure,short term investment.

This serves as an evidence or receipt for money that is deposited with a bank or with a financial organization. Certificates of Deposits have become a preferred investment choice for organizations in terms of short-term surplus investments as they carry low risk while providing interest rates which are higher then those provided by treasury bills and term deposits. It can be issued to companies, corporations,funds,associations,individuals

(except minors), trusts,etc.


Maturity period for commercial papers can range from 1 to 270 days. Commercial papers are not secure but they have a higher interest rate compared to T-bills. Promised higher returns are available in highly popular countries like UK,USA,Japan,Australia and others.

  • REPURCHASE AGREEMENT (Repo or Reverse Repo)

Reverse Repo is an agreement between a buyer and a seller for the purpose of selling and repurchasing. Transactions are only permitted between securities approved by the RBI like treasury bills,central or state government securities,corporate bonds and PSU bonds.


In this special arrangement,interest and withdrawal is on demand. Participating institutions invest surplus money on an overnight basis. It provides solution to the immediate stock of liquidity pressures in the money market.


Bankers acceptance is basically a document promising future payment which is guaranteed by a commercial bank. It is very similar to bill of exchange in the sense that the debtor also shows indebtedness to the creditor through a promissory note. Maturity period ranges between 30 to 180 days.


The institutions involved in the money market include:

  • Central banks

This is the head of all banks in a particular country. This bank controls every aspect related to money and it also regulates other institutions that provide credit facilities.

  • Discount houses

They help in rediscounting bills of exchange. This means that they apply a discount for the second time,increasing the difference between the discount price and it’s par value. They deal with three kinds of bills: Domestic bills, foreign bills,government and treasury bills.

  • Commercial banks

This is a very important institution in the money market. They have the authority to issue various instruments used in the money market. They can also consult the help of the market in solving their liquidity problems.

  • Acceptance houses

They specialize in accepting bills of exchange. They act as second signatories on the bills of exchange. Like any finance house,they will take a little commission for the services rendered but security is guaranteed.

  • Insurance companies
  • Finance houses

Just like the physical money market I explained above,the crypto world also has its own money market where users can buy, sell and swap cryptocurrencies.DeFi(Decentralized Finance) helps users to lend or borrow crypto assets easily without the use of a bank,broker or any intermediaries.


Compound is an algorithmic,autonomous interest rate protocol built for developers,to unlock a universe of open financial applications.

The Compound protocol currently has $1,071,551 of AAVE earning 8.09% interest. Compound finance is a decentralized market place that allows crypto investors to lend and borrow digital assets by locking their crypto assets in the protocol. It also has its own token called COMP token. Interest rates depend hugely on the demand and supply of crypto assets.

Only a particular selection of cryptocurrencies are available on compound. The tokens selected are:

  • Ether(ETH)
  • USD coin(USDC)
  • Wrapped BTC(WBTC)
  • Sai(SAI)
  • Dai(DAI)
  • Basic Attention token(BAT)
  • Tether(USDT)
  • Ox(ZRX)
  • Augur(REP)

With these tokens,you can easily lend and borrow crypto on compound hassle free. The software was built with $8.2 million in venture funding,led by notable investors Bain Capital ventures,Andreessen Horowitz and Polychain. Compound founder Robert Leshner sees two very important uses for compound:

  • For traders that want to leverage a long position in a token,they can borrow from compound and buy more of the token they want to place a bet on. The amount borrowed must also be traded in any of the currencies mentioned earlier.
  • For shorting- This is a way of making money on an asset when its price goes down.

There are a lot of DeFi projects out there,compound boasts of not just being any DeFi project but a project that allows tokenization of assets locked in the system by using COMP tokens.


Just like Compound, AAVE is another lending protocol in DeFi. It allows people to lend or borrow crypto assets easily. AAVE token is the native token of the Aave protocol.Aave is the Finnish word for ghost,that is why the logo is that of a friendly ghost.

It is built on the Ethereum blockchain.


An initial version of AAVE came out in 2017 and was known as ETHLend. ETHLend was created in Finland by Stani Kulechov.The primary goal was to make lending and borrowing of digital assets very easy for users of this platform. Some difficulties were also present in the use of AAVE protocol such as:

  • Lack of liquidity
  • Since it was of a peer-to-peer nature,there was also difficulty in matching loan requests with appropriate lenders.

This led to the temporary setback experienced in 2019. In view of this,ETHLend developers scrapped out the peer-to-peer nature and introduced the use of smart contracts(the use of a network of computers to handle deals). The name was also changed from ETHLend to AAVE. The project is called ghost because users remain anonymous when using the protocol.


With AAVE,you can deposit 26 different cryptocurrencies with interest earned and borrow 25 cryptocurrencies. ETH and LINK are the most available on AAVE and stable coins like USDC. AAVE uses an algorithm to determine current rates based on the utilization rate- the ratio of current supply versus the amount borrowed. The lending pool is directly proportional to the interest rate,that is,as more crypto is being lent out,the interest rate increases and vice versa.

AAVE uses two different types of tokens:

  • ATokens- This is the token given to lenders to collect interest on deposits,it is an ERC-20 token.
  • AAVE token- This is the native token of the Aave protocol.

AAVE is also a deflationary asset because tokens are removed from circulation when used to pay for fees on the Aave protocol.


Pontem is the first Aptos decentralized exchange building DeFi projects on the most scalable,reliable and safest layer blockchain.

It aims to bridge the gap between the two metaverses(permissions and public blockchain ecosystems) to allow exchange of data and value. For more info, please visit any of our social media pages-Telegram,Twitter,Discord and Medium.

Install our wallet and try DEX

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