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# 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 Deposits can be withdrawn anytime unless every token in a market is borrowed.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 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:$oTokenExchangeRate(t) = \frac{totalDeposited(t)+ totalBorrowed(t) - reserves(t)}{oToken Supply(t)}$

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 protocol’s interests is allocated to a collector contract from the ecosystem treasury, saved to the parameter $reserves(t)$

. As the market’s 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:$oTokenMinted =\frac{depositAmount}{oTokenExchangeRate(t)}$

And amount of underlying asset user receives when oToken is calculated as below:

$receiveAmount = oTokenBurned \times oTokenExchangeRate(t)$

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:$L(t) = B(t) \times U(t) \times (1-r)$

Reserve factor is set at

**10%**Last modified 1yr ago