The Supply Net APY of an asset consists of two components: Supply APY and Rewards. These components contribute to the overall earnings and rewards of depositing assets to the protocol.
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The Supply APY represents the automatic compounding earnings generated by lending assets to the protocol. It is calculated based on borrower fees.
Here are the key points to understand about Supply APY:
- 1.Auto-compounding: The Supply APY is automatically compounded back into the underlying smart contract of the supplied asset. This allows for continuous growth of the earnings over time.
- 2.Asset-specific Rewards: The Supply APY is distributed in the same token that was supplied. For example, if GLMR tokens are supplied, the earnings will be in GLMR tokens.
- 3.Determining Supply APY: The Supply APY is determined by the supply and borrow demand for the asset. The protocol considers the current market dynamics and adjusts the APY accordingly. When a market has higher utilization, depositors can expect higher earnings.
- 4.Monitoring Rewards: Users can track the accumulation of Supply APY earnings over time by checking the supplied value of the respective asset.
These are rewards that need to be manually claimed.
Here are the key aspects of Rewards:
- 2.APR Rewards: Rewards are in APR (Annual Percentage Rate) and do not compound.
- 3.Source of Rewards: Rewards can be sourced from various providers or grants, including the Lunar Technology Foundation and Moonbeam Foundation. For example, if GLMR tokens are supplied, users are able to earn both WELL and GLMR token rewards.
Market utilization is a metric that calculates the percentage of borrowed funds relative to the total supply of assets in a specific market. A utilization rate above 100% indicates that the total borrow amount has surpassed the total supply, including both the principal borrowed amount and any accrued interest on the asset.
When a market's utilization approaches 100%, users with current lending positions of the associated asset may experience difficulties withdrawing their assets due to potential liquidity shortages. In such cases, users should monitor the market liquidity and plan their transactions accordingly.
To ensure successful withdrawals, users should keep an eye on the following:
- 1.Market Liquidity: Regularly check the market liquidity information provided for each market. This information can help determine the availability of funds for withdrawal.
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.
- 2.Timing: Plan withdrawal transactions during periods of higher liquidity to increase the chances of successful withdrawals.
- 3.Transaction Monitoring: After initiating a withdrawal, users should monitor their transaction logs on block explorers like Basescan (Base), Moonscan (Moonbeam) and Moonscan (Moonriver). Any failure messages in the logs indicate unsuccessful withdrawals. 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.