Lend

Lending in the Neptune Protocol offers a way for users to earn yield on crypto assets which is generated by borrowers. Lending deposits in Neptune are represented by nTokens, a liquid receipt token which can be transferred, used as collateral and utilized in third party protocols. A users lending deposits can be redeemed by returning nTokens to the protocol.

How Lending Works

Lending in the Neptune Protocol allows users to deposit their digital assets into a lending pool. In return, they receive nTokens, which represent their share of the pool. These nTokens automatically accumulate interest over time.

Steps to Lend

1. Deposit Assets: Users deposit their assets into the Neptune lending pool.

2. Receive nTokens: In exchange, users receive nTokens, which are CW20-compliant tokens representing their share of the pool.

3. Accumulate Interest: As the pool generates interest, the value of nTokens increases, allowing users to redeem more of the underlying asset than they initially deposited.

Lending Equation

The value of nTokens increases as interest accrues. The relationship can be expressed as:

$$\text{nToken Value} = \text{Initial Deposit} \times (1 + \text{Interest Rate})^t$$

Where:

• Initial Deposit is the amount of assets initially deposited.

• Interest Rate is the rate at which interest is accrued.

• t is the time period over which interest is calculated.

Understanding nTokens

nTokens are a crucial component of the Neptune Protocol. They serve as proof of a user's lending position and can be used as collateral for borrowing.

Key Features of nTokens

• Interest Accumulation: nTokens automatically accumulate interest, increasing in value over time.

• Transferability: nTokens can be transferred between users, maintaining the underlying lending position.

• Collateral Use: nTokens can be used as collateral in Neptune markets, allowing users to borrow against their lending positions.

Redeeming Assets

Redeeming is the process of exchanging nTokens back for the underlying assets. As nTokens accumulate interest, users can redeem them for more assets than they initially deposited.

Steps to Redeem

1. Burn nTokens: Users initiate the redemption process by burning their nTokens.

2. Receive Assets: In return, users receive the underlying assets plus any accrued interest.

Redemption Equation

The amount of assets received upon redemption is calculated as:

$$\text{Redeemed Assets} = \text{nTokens Burned} \times \text{Current nToken Value}$$