Lending
In the Arkis Protocol, Lenders provide liquidity to fuel the credit extended to Leverage Traders. By depositing their tokens into Liquidity Pools (LPs), Lenders earn a passive yield on these assets.
Tokens available for lending
Participants can provide a variety of tokens to the liquidity pools. The tokens currently accepted include:
wETH
wstETH
wBTC
USDT
USDC
DAI
FRAX
Arkis operates each pool on the integrated blockchain network it supports, which can influence the yield outcomes. For instance, providing wETH on the Avalanche network might yield a higher APY compared to providing it on the Ethereum network. This is due to Arkis's smart Interest Rate Model that dynamically adjusts supply and borrow APYs based on the pool’s utilization rate.
Lending How-to
Considerations
Before lending, users should consider the following:
Token Selection: Choose which token you wish to lend.
Blockchain Choice: Select the blockchain on which you wish to provide tokens.
Pool Type: Decide whether to participate in a Base or Profit Sharing pool.
How to Lend
Lenders can visit the APY Rates page on the Arkis platform to view how different Lend/Borrow APYs fluctuate across various chains and time frames. This information helps lenders choose the most optimal conditions under which to lend their assets.
Types of Liquidity Pools
Base Lending Pools
Participating in Base Lending Pools is akin to engaging with established lending protocols like AAVE or Compound. In these pools, users receive a passive yield, known as Base APY, on the liquidity they provide. This setup allows for a straightforward and potentially rewarding lending experience within the Arkis ecosystem.
Profit Sharing Pools
Profit Sharing Pools are designed for users who seek a higher potential yield on their assets by contributing liquidity. These pools offer a unique opportunity to earn returns not only from a base interest rate but also from a share in the trading profits generated by Asset Managers who utilize the borrowed funds.
Components of APY in Profit Sharing Pools
Base APY: This is the foundational interest rate earned by lenders, regardless of the trading outcomes of Leveraged Traders. It's important to note that the Base APY in Profit Sharing Pools is typically lower than that in Base Pools due to the additional profit-sharing component.
Profit Sharing APY: This additional APY is derived from a percentage (ProfitSharingPct) of the trading profits generated by Asset Managers. This percentage is dynamically adjusted based on the Arkis Protocol’s Interest Rate Model. It's crucial to understand that Profit Sharing APY only increases with positive trading profits; losses do not impact it. If all Leveraged Traders incur losses, the Profit Sharing APY would effectively be zero.
Yield Dynamics
Minimum Yield: The lowest total yield a lender can receive is the sum of Base APY and any applicable Rewards APY. This ensures that lenders have a guaranteed return, independent of trading performance.
Maximum Yield: There is no upper limit to the total APY in Profit Sharing Pools. The maximum yield depends entirely on the performance of Asset Managers—more successful trading results in higher contributions to the Profit Sharing APY.
ProfitSharingPct is a parameter that is also dynamically changed by our Interest Rate Model.
LP tokens
Upon depositing tokens into a liquidity pool, users receive corresponding LP tokens. These tokens represent the user's share in the pool and are the medium through which interest is accrued.
Interest on LP tokens is calculated daily. However, the accrued interest value is only updated when a Leveraged Trader closes their Margin Account and returns the borrowed funds to the liquidity pool. This system ensures that the reflection of earnings in LP tokens is directly tied to actual liquidity returns, enhancing the accuracy of yield calculations.
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