Borrowing and Lending

Spot Markets

The margin that Cypher offers for spot markets is enabled by borrowing and lending pools. Each collateral asset will have its own borrowing and lending pool, with lending dynamics unique to each asset.

Users that deposit any of these assets into an account will automatically lend the asset and begin earning yield depending on the utilization ratio of that asset across the protocol.

Derivatives Markets

Long positions are margined in USDC, paying interest on their borrows according to the utilization of the USDC lending and borrowing pool.

The USDC is borrowed from the USDC pool. Any trader that deposits USDC into an account contributes to the pool of available USDC, and is compensated according to the linear-piecewise interest rate curve below.

Protocol Borrowing/Lending Dynamics

Due to the nature of a linear-piecewise interest rate pricing model, the borrow interest rates for both long positions and short positions increases considerably when the

borrows deposits>75%\frac{\textrm{borrows}}{\textrm{ deposits}}>75\%

The dynamics of borrow interest rates can be graphically represented as a piecewise function where the 'kink' represent the optimal utilization ratio which is 75% on cypher:

Note: Values above are merely used for the purpose of the example and final parameters for the piecewise function may be subject to change.

Last updated