Lending explained
Last updated
Last updated
Lending is a straightforward way to grow your assets. Simply deposit them into Axly and observe your balance increase continuously. There's no lock-up period, providing you flexibility and freedom. For a step-by-step walkthrough, check out our guide.
The assets from the loan fund are offered to farmers for leveraging up their positions. A unique aspect of this arrangement is that the loan fund operates as a secure, self-contained lending market, inaccessible to outside borrowers. All the borrowed assets are kept within the platform, meaning borrowers cannot abscond with the borrowed funds.
The liquidity invested in the farming pool (including the farmer's own funds) serves as collateral for the loan. Loan-to-value ratio is closely monitored to ensure it stays healthy. If necessary, Axly timely liquidates underperforming farming positions to to pay off part of the debt, thereby safeguarding your deposit.
Borrowing interest paid by farmers translates into the Lending Annual Percentage Yield (APY) earned by lenders, after deducting a lending fee. Both the Borrowing interest and Lending APY are dynamic, varying based on the asset's utilization:
When the utilization is high and the asset is scarce, Borrowing interest and Lending APY both increase. This state incentivizes lenders to deposit more of that asset to meet demand and earn higher returns. Conversely, higher Borrowing interest could discourage borrowing, thereby reducing demand. This dynamic interest model enables Axly to maintain a balance between supply and demand, ensuring optimal returns for lenders.
