Lending

What is the Lending Module?

Through this module the users will be able to earn a stable return on the base assets by depositing them in the lending vaults. The user just deposits the asset and starts earning automatically.

How does the lender earn a return?

The assets staked in the lending vaults are available for the Yield Farmers to borrow and open a leveraged farming position. The farmers pay an interest fee for this loan to the lenders who staked these assets.

How is the interest rate calculated?

You can check the interest rate model in the Global Parameters.

Is there a risk of default by the farmers?

There is no risk of default as the liquidators and the liquidation system ensures all loans are properly collateralized. When an open position is reaching a risk of default, it gets closed and the lenders get paid back.

What are bkrTokens?

When users deposit the base asset in one of the lending vaults, they are issued a corresponding balance in bkrTokens.

The bkrTokens are the representation of your balance in the lending vault.

Each lending vault has its own bkrToken. For example, if a user lends AVAX, they will receive bkrAVAX corresponding to the balance staked.

How do bkrTokens earn interest?

The users earn interests just by holding the bkrTokens.The interest pay by the farmers is not distributed, but is accumulated in each lending vault.

As stated before, the bkrTokens are the representation of your balance in the vault. As these interests are accumulated, the balance of your bkrTokens increases, so the value of each bkrToken increases.

The longer a user holds bkrTokens, the higher the value of those tokens appreciates. This is the accumulation of interest. The exchange rate of each bkrToken is displayed in the lending vault.

Example:

Bob deposits 100 AVAX in the lending vault when each bkrAVAX is worth 1.1 AVAX, so he receives 90.9 bkrAVAX (100 / 1.1)

Some time after, Bob decides to withdraw the assets from the vault, when the exchange rate is 1.2. The exchange rate increased because of the accrued interests in the vault.

So now Bob's 90.9 bkrAVAX are worth 109.1 AVAX (90.9*1.2), and this is what he received when he withdrew, resulting in a gain of 9.1 AVAX compared to the initial staking of 100 AVAX.