For lending SOL to Perpetual loans borrowers. We decided to go for risk-isolated lending pools so lenders can allocate their funds to the collections they trust the most
How are lending APRs calculated?
Each collection whitelisted for Perpetual loans will get its own isolated lending pool. The list of collections available for Perpetual loans is available here.
Lending APR for each collection is dynamic and is based on the amount of liquidity available in the associated isolated lending pool :
High liquidity and low utilization rate = Low lending interest rate
Low liquidity and high utilization rate = High lending interest rate
How is the interest generated distributed?
The borrow interest rates paid are distributed as yield for lenders who have deposited in the protocol, excluding a share of yields sent to the ecosystem reserve and another share going to FRAKT as revenue. More details on the interest model are available here
This interest rate is paid on the capital that is lent out then shared among all the liquidity providers
The higher the utilization rate the lower the profit rate for FRAKT and the higher the deposit rate for depositors (lenders rewards)
Reserve factor and ecosystem reserves
The 30% reserve factor for Perpetual loans and Isolated lending pools is a safety mechanism that is progressively fueling the ecosystem reserves. These reserves are being accumulated and stored in case of bad debt or any black swan event happening so the protocol can repay lenders in such cases