Lending

What is lending?

Lending is the practice of supplying assets into the lending pool so that leveraged yield farmers can borrow these underlying assets to perform leveraged yield farming. Lenders can lend many assets (e.g. APT, USDT, USDC, DAI, ETH, BTC) on EZ-FI to earn from lending APY.

How lending APY comes from

Lending APY comes from the borrowing interest rate that leveraged yield farmers pay for borrowing the assets from the lending pool to yield farm.

Whenever users deposit base assets to a lending pool, ibTokens specific to an underlying asset are generated as a representative of user's stake in the pool. ibTokens received are proportional to user's supply and accrues lending interest overtime. Once users withdraw assets from the pool, ibTokens are converted back to the base asset at an increased amount (initial supply value + lending interest). Learn more about ibTokens here.

Lender Risks

Lenders don’t bear risks from impermanent loss and liquidation risks from leveraged positions like the protocol’s leveraged yield farmers. Instead, lenders share the risk of the illiquidity of the pool.

Risk of Illiquidity

Users may not be able to make a withdrawal if liquidity in the lending pool is not enough. This can occur when the asset utilization rate is significantly high. In order to withdraw, either withdraw a smaller proportion or wait until the asset utilization drops.

How EZ-FI helps mitigate risks

Regardless, with risks come solutions too. There are ways that users can protect their assets from the risks mentioned earlier. We have prepared you with the following solutions.

Protection Against Illiquidity 🛡

EZ-FI will partner with other lending protocols or liquidity pools to adopt the Triple-slope Interest rate model which incentivizes a healthy utilization ratio to mitigate the risk of illiquidity.