Protocol Information

Protocol Math

APY = normalizedEmissionPerSecond * rewardTokenPriceInEth * seconds_per_year / normalizedTotalTokenSupply

Supply APY

Supply APY refers to the interest rate received by users who provide assets to the platform. Users earn a percentage of the supplied asset, which accumulates automatically. This rate is determined by the "Supply APY" value, which fluctuates based on the ratio of supplied assets to borrowed assets (market utilization). For instance, a user supplying ETH to Basilisk may earn additional ETH tokens.

A situation with a large supply and low borrowing may result in a lower supply APY, as there is less demand for borrowing. Conversely, a higher borrowing rate coupled with a lower supply could lead to a higher supply APY to encourage users to provide more assets to the platform.

Example of Supply APY:

When you provide $1,000 USDC to the platform, and the USDC Supply APY stands at 10%, you can expect to earn approximately $100 in USDC interest over the course of a year, which is paid by the borrowers.

Borrow APY

The Borrow APY represents the interest rate applied to users who take out a loan using an asset, indicating the cost they will incur for borrowing. Presently, this rate is counterbalanced by the distribution APY rewards (currently awarded in BLSK on Basilisk). In certain uncommon scenarios, the rate may be advantageous enough that users could potentially earn rewards not only for providing assets but also for borrowing them.

Example of Borrow APY :

When you take out a loan of $1,000 USDC with a USDC Borrow APY of 10%, over the course of a year, you will accumulate around $100 in USDC interest. Consequently, your outstanding loan balance will be approximately $1,100.

Collateral factor

The maximum that can be borrowed on a particular asset.

Example of Collateral Factor:

The collateral factor for ETH is 60%. When you deposit $1,000 worth of ETH as collateral, you can borrow up to $600 in other assets.

Please be aware that it is strongly advised to stay below 80% of your borrowing limit. In this example, it would be best not to borrow more than $480 ($600 * 80%). Exceeding 80% of your borrowing limit significantly increases the risk of liquidation.

Reserve factor

The proportion of a borrower's interest payment that is allocated to the Basilisk protocol reserves.

Example of Reserve Factor:

  1. You borrow $1,000 in USDC.

  2. The USDC Borrow APY is 10%.

  3. After one year, you repay approximately $100 in interest.

  4. The Reserve Factor is set at 20%.

  5. Out of the $100 interest payment, $20 is directed to the Basilisk protocol reserves.

Close factor

The maximum amount of an outstanding borrow that can be closed in a single liquidation event.

Example of Close Factor:

  1. Your Health Factor falls below 1, indicating that your account is subject to liquidation.

  2. At the moment, you have borrowed 1000 USDC, with a Close Factor of 50%.

  3. A liquidator repays half of your outstanding loan (500 USDC) and claims an equivalent sum from your collateral, along with the liquidation incentive.

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