Lender APY

Lender APY depends on a set of variables comprising the Pool state and a number of parameters. These variables are:

• Weighted Average Loan APR

• Borrow Rate (as a ratio of Borrowed Capital to Total Pool Capital)

• Protocol Fee Percent

• Stake-to-Pool Ratio

• Staker Earning Factor

Lending pools publicly provide information on Projected Lender APYs for current and arbitrary borrow rates. The Projected Lender APY is calculated in the following manner:

First, the Pool APY is calculated:

$$poolAPY = weightedAvgLoanAPR * \frac{borrowedCapital}{totalPoolCapital}$$

​Next, the Protocol Fee APY is calculated, representing the portion of the Pool APY allocated to protocol fees:

$$protocolFeeAPY = poolAPY * protocolEarningPercent$$

Then, the portion of the APY corresponding to the First Loss Capital Provider’s leveraged earnings is calculated:

$$stakeToPoolRatio = \frac{stakedCapital}{totalPoolCapital}$$

$$leveragedEarnPercent = stakeToPoolRatio * (stakerEarnFactor-100\%)$$

$$stakerWithdrawbleAPY = (𝑝𝑜𝑜𝑙𝐴𝑃𝑌−𝑝𝑟𝑜𝑡𝑜𝑐𝑜𝑙𝐹𝑒𝑒𝐴𝑃𝑌) * \frac{𝑙𝑒𝑣𝑒𝑟𝑎𝑔𝑒𝑑𝐸𝑎𝑟𝑛𝑃𝑒𝑟𝑐𝑒𝑛𝑡}{100\%+𝑙𝑒𝑣𝑒𝑟𝑎𝑔𝑒𝑑𝐸𝑎𝑟𝑛𝑃𝑒𝑟𝑐𝑒𝑛𝑡}$$

Finally, the Lender APY is calculated as the difference between the Pool APY and the sum of the Protocol Fee APY and First Loss Capital Provider’s Withdrawable Earnings APY:

$$lenderAPY = poolAPY - (protocolFeeAPY + stakerWithdrawableAPY)$$