Passive Lenders

  • Lenders provide capital and earn passive APY. The mechanic is similar to what users are used to in Aave.

  • The asset you lend is borrowed by Strategy users.

  • After your assets are lent out, they are held in a non-custodial smart contract —aka an Account. You can read more about Accounts here.

  • At launch, there will be two lending pools available. One USDC pool and one wETH pool. Each pool is isolated from each other.

  • More pools for different assets can be created at any time.

  • There are no lock-up periods or withdrawal fees for Lenders unless there is an ongoing auction. There’s no impermanent loss either.

  • Arcadia provides best-in-class dashboards for Lenders to track all the relevant metrics they need to make decisions, including pool utilization, historical APYs, historical borrow rates, and more.

Where does the yield come from?

  • When Traders and Farmers borrow assets from the lending pools, they pay an interest rate to the Lenders. The interest rate paid is dictated by the utilization of the pool. When there is high demand to borrow, the interest rate paid to Lenders is high. Conversely, when there is low demand to borrow, the interest rate paid to Lenders is low. Most protocols take a cut of the interest rate. We don’t. Instead, Arcadia passes ALL of the rewards to Lenders.

  • When an Account is liquidated by third-party liquidators, a percentage of the liquidation penalty fee also goes to Lenders —up to 7% of the auctioned collateral. Here as well, Arcadia takes no fee and passes all the rewards to Lenders.

  • Extra rewards available from other protocols (or ecosystem grants) will be shared with Lenders too.

  • In short, by providing liquidity in Arcadia, Lenders earn all the interest rate paid by borrowers + all of the liquidation fees + any token rewards available. Your profit will depend on how long your money was lent out and what the rates looked like in that period.

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