Lenders

Lenders provide capital and earn passive APY.

How does it work?

Lenders deposit a single asset in one of the Arcadia Lending Pools, which can be borrowed by Strategists and Farmers to build leveraged positions.

There are currently three available Lending Pools, with more to come in the future. Current pools are:

• USDC Lending Pool

• WETH Lending Pool

• cbBTC Lending Pool

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

For a detailed guide how to deposit in a Lending Pool, see Here.

Where does the yield come from?

All yield is ultimately coming from the Strategists and Farmers who borrow funds in their AMM strategies to boost their returns. As such, Lenders can indirectly benefit from the yield earned by providing liquidity on AMMs, without having to manage the AMM liquidity positions themselves.

There are two mechanisms by which Strategists and Farmers pay lenders: interest payments and liquidiation penalties:

Interest Payments

When Strategists and Farmers borrow assets from the lending pools, they pay interests 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 on the interest rate while passing it on to the Lenders. Arcadia doesn't! ALL of the interests are currently passed on to Lenders.

Liquidation Penalties

When an Account is liquidated by third-party liquidators, a percentage of the liquidation penalty fee also goes to Lenders —up to 2.4% of the open debt. Here as well, Arcadia takes no fee and passes all the rewards straight to Lenders.

What are the risks

Since Lenders do not manage the AMM liquidity positions themselves, they do not have direct market or impermanent loss risks.

The risks they are exposed to:

• Smart contract risks, for which they can take insurance.

• Bad debt. If liquidations of unhealthy Accounts fail or the proceeds of the auctions are not sufficient to cover the open debt, a default event is automatically triggered. All Lenders will lose part of their funds pro rata to their fraction of the lending pool's total assets to recover the bad debt.