Lending and borrowing

Each lending pool in ARCO is associated with a DEX and a token pair. The following high-level information is provided for each lending pool:

• Total Supply — The total amount of tokens supplied to the lending pool

• Total Borrowed — The total amount of tokens borrowed from the lending pool

• Borrow limit — The ratio between Total Borrowed and Total Supply

• Supply APY — The current effective APY earned by lenders for supplying tokens

• Borrow APY — The current effective APY paid by borrowers for borrowing tokens

Lending & Borrowing

Lenders can deposit either token into its associated Supplyable contract for that token. With this collateral, a borrower can create a loan, which requires a certain amount of the underlying tokens, provided there is sufficient liquidity in Borrowable contracts to create the loan. Later, they can exchange their interest-bearing token for the original token, with accrued interest, provided there is sufficient liquidity in the Supplyable contract for that token.

Liquidation

If, at any time, the collateral value for a borrower’s loan is less than the minimum collateral required, the loan can be liquidated. Anyone can liquidate a loan in a liquidatable state in a permissionless manner. The liquidator repays the loan and receives, in exchange, the value of the borrowed LP tokens multiplied by the liquidation incentive. The liquidation mechanics help to ensure the stability of the protocol.