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Liquidity providers earn yield by lending their assets in the protocol
Liquidity Providers interact with Arcadia by supplying their assets to the lending pools and earning a passive return for doing so. The liquidity provided by Lenders is then lent out to borrowers in the form of margin.
Lenders receive a yield-bearing token (ERC-4626), to which interest and rewards accrue automatically, proportional to their share of the pool.
- 1.Lenders open the 'Earn' page displayed in the top navigation bar.
- 2.Lenders select the pool they want to provide liquidity into.
- 3.Lender chooses the risk tranche (senior or junior) from the drop-down menu on the selected pool.
- 1.Senior tranche: receives yields by accruing part of the interests paid by borrowers. The senior tranche is shielded by the Junior Tranche in case there is bad debt, in return yields of the senior tranche are lower as the yields of the junior tranche.
- 2.Junior tranche: receives yields from interests paid by borrowers (higher as the senior tranche) and receives additional yield from liquidations. However, in the case that a debt position becomes under-collateralized, the junior tranche will be the first tranche to lose part of their principal to write off the bad debt. To protect both the up- and downside of liquidations, the junior tranches will be locked when a liquidation auction is in progress.
- 4.Lender enters the amount of tokens they would like to Deposit, confirm the amount and sign the transaction in their wallet.