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Annual Percentage Yield

📊 Annual Percentage Yield (APY)

APY reflects compounded returns to suppliers after protocol reserves.

It depends on three primary factors:

  • the borrow rate path
  • market utilization
  • the compounding window used for estimation

⚙️ How APY is Derived

Interest rates in each market follow a utilization-based rate model.

Borrow APR

Borrow APR is determined directly from the utilization-based interest rate curve.

Supply APR

Supply APR is derived from the borrow rate and market utilization:

Supply APR = Borrow APR × Utilization × (1 − Reserve Factor)

APY

APY represents the compounded version of the supply APR.

On-chain, interest accrues continuously through the protocol’s index mechanism.
User interfaces and APIs may display APY using daily compounding estimates for readability.

🖥️ Interface Display

User interfaces should present interest metrics clearly and transparently.

Recommended display elements include:

  • Live APY per market, derived from on-chain indexes
  • Clear indication of the compounding assumption (continuous vs daily)
  • Reserve-adjusted supply APY (post-reserve)
  • Gross borrow APR displayed separately
  • A historical APY chart derived from realized utilization rather than theoretical curve points

⚠️ Important Considerations

APY values are dynamic and sensitive to market conditions.

  • Sudden increases in utilization can produce short-term APY spikes
  • Interface labels should clarify that rates are variable

During the testnet phase, APY is provided for informational purposes only and may reset following contract redeployments.

APY should always be presented alongside health and risk indicators, ensuring that borrowers and suppliers do not interpret yield metrics as guaranteed returns.