Core Concepts

Supply Assets

Users can supply supported assets into Hydro Lending to earn a variable yield. Supplied assets become part of the liquidity pool and are made available for borrowers. Suppliers (lenders) also receive interest for adding to the lending pool.

Borrow Assets

Users can borrow assets by providing collateral. The borrowed amount and collateral ratio are subject to dynamic parameters like Loan-to-Value (LTV) ratios.

Collateralization

Borrowers must deposit assets that act as collateral. The collateral ensures the protocol is protected against borrower default. The value of the collateral determines the maximum borrow limit.

Loan-to-Value (LTV)

The LTV ratio measures how much a user can borrow relative to the value of their collateral. For example, an LTV of 70% means that for every $100 of collateral, a user can borrow up to $70 worth of assets.

Interest Rates and Utilization Ratio

Interest rates on Hydro Lending are dynamic and depend on the utilization ratio of each asset pool:

• High Utilization: Borrow rates rise, incentivizing repayment or new supply.

• Low Utilization: Borrow rates drop, encouraging more borrowing activity. The dynamic model ensures market equilibrium between lenders and borrowers.