Lend FAQ

Frequently Asked Questions - Lending

How is the Supply APY Calculated?

The Supply APY (Annual Percentage Yield) of an asset on Moonwell consists of two components: Base APY and Rewards.

Use the information tooltip to reveal the distribution.

Base APY

The Base APY represents the automatically compounding interest rate earned by lenders for supplying assets on Moonwell. It is calculated based on fees paid by borrowers.

Here are the key points to understand about Base APY:

1. Auto-compounding: The Base APY is automatically compounded back into the underlying smart contract of the supplied asset. No manual claiming is required.

2. Asset-specific Rewards: The Base APY is distributed in the same token that was supplied. For example, if USDC is supplied, USDC is earned.

3. Determining Base APY:

   • Base APY is determined algorithmically based on market utilization.

   • Interest rate curves, set via Moonwell Governance. define the relationship between market utilization and Base APY.

   • Higher market utilization (more borrowing) leads to a higher Base APY, as per the interest rate curve.

   • Lower market utilization results in a lower Base APY.

4. Monitoring: Users can track Base APY earnings over time by checking the supplied value of the respective asset.

Rewards

Rewards are additional incentives that need to be manually claimed by the user.

Key Aspects:

1. Manual Claiming: Rewards must be manually claimed via the "Lend" or "Portfolio" pages.

2. APR (Annual Percentage Rate): Rewards are in APR and do not compound.

3. Sources: Rewards can be sourced from various providers or grants. For example, if USDC is supplied, users are able to earn both WELL and USDC token rewards.

Market Utilization and Liquidity

Market utilization is a metric that tracks the percentage of borrowed funds relative to the total supply of assets in a specific market.

• Utilization above 100% indicates the total borrow amount has surpassed the total supply (including accrued interest).

• When utilization approaches 100%, withdrawing assets may be difficult due to liquidity shortages.

Utilization measures how much is currently borrowed compared to the total amount supplied.

To ensure successful withdrawals, users should:

1. Monitor Market Liquidity: Check the market liquidity information provided for each market.

Monitoring market liquidity is crucial, as it offers valuable insights into the overall market conditions. By keeping an eye on liquidity levels, one can assess how easily transactions can be executed and evaluate the potential risks associated with illiquid markets.

1. Timing: Plan withdrawals during periods of higher liquidity.

2. Transaction Monitoring: Monitor transaction logs on block explorers such as Basescan (Base), Moonscan (Moonbeam) and Moonscan (Moonriver) for any failure messages indicating unsuccessful withdrawals due to insufficient liquidity. If a user attempts to withdraw more liquidity than is currently available, the withdrawal will fail.

Monitoring market utilization and liquidity is essential for making well-informed decisions and ensuring successful withdrawals.