Lending
Users can become lenders by depositing their preferred asset that is accepted by the protocol. Deposits can be withdrawn anytime unless every token in a market is borrowed.
Lending interest is distributed through the value appreciation of oToken, which is minted to lenders as a deposit receipt.
oToken
oToken balances represent a depositor's share in the market. The exchange rate with their underlying token, the oToken exchange rate, increases as deposits accrues interest, appreciating the value of oToken. With time, holders can redeem oToken with a greater number of underlying tokens, enabling depositors to collect interest simply by holding them.
The oToken exchange rate at time is defined as:
Where and is the amount of money sent into the system and amount of money borrowed by the borrower at time . A share of the protocolโs interests is allocated to a collector contract from the ecosystem treasury, saved to the parameter .
As the marketโs total borrowing balance increases (as a function of borrower interest accruing), the exchange rate between oToken and the underlying asset increases.
The amount of oToken a user receives when depositing underlying asset is calculated using the value using the formula below:
And amount of underlying asset user receives when oToken is calculated as below:
Lending Interest Rate
The equation above simply means that all income received through lending, after a small portion is subtracted to deposit into the system's reserve, will be split equally among lenders.
The lending interest rate at time can be re-expressed by the following formula:
Where โ is utilization rate and โ is borrow rate at time and is reserve factor.
Reserve factor is set at 10%
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