# 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 Deposits can be withdrawn anytime unless every token in a market is borrowed.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 $t$ is defined as:

Where $totalDeposited(t)$ and $totalBorrowed(t)$ is the amount of money sent into the system and amount of money borrowed by the borrower at time $t$. A share of the protocolโs interests is allocated to a collector contract from the ecosystem treasury, saved to the parameter $reserves(t)$.

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 $oTokenExchangeRate$ 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 $L(t)$ at time $t$ can be re-expressed by the following formula:

Where $U(t)$โ is utilization rate and $B(t)$โ is borrow rate at time $t$ and $r$ is reserve factor.

Reserve factor is set at **10%**

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