Annual Percentage Yield (APY)

The Annual Percentage Yield (APY) dynamically adjusts to reflect the current utilization of our lending services. The APY on JAX Finance comprises several key components:

Supply APY

This represents the base interest rate earned on supplied assets and varies with the value of the supplied assets.

Borrow APY

This is the basic interest rate applied to borrowed assets, which increases with the size of the borrowed asset and can sometimes be negative, indicating a situation where interest is paid by borrowers.

Net APY

The Net APY is calculated as follows:

Copy

Net APY = (Annual Supply Earnings - Annual Borrow Costs) / (Deposit Value + Borrowed Value)

It can be negative if Borrow APY doesn't cover the entire yield.

Example

Suppose a user deposits 1 ETH and borrows an 60% of deposited value in stablecoins on JAX Finance. Let's consider the following rates: Supply APY for ETH: 3%; Borrow APY for stablecoins: 6%.

Supply Side:

The user's 1 ETH deposit (assuming 1 BTC = $5,000 for simplicity) earns a base APY of 3%, amounting to $150.

Borrow Side:

For borrowing 60% of the deposit value in stablecoins ($3,000), the user faces a 6% borrowing APY, which is $180.

Net Earnings and APY Calculation: Total Supply Earnings: $150 Total Borrow Costs: $180

Net Total Earnings: $150 ( annual supply earnings) - $180 (annual borrow costs) = -$30

Net APY = (-$30) / ($50,00 + $3,000) = -0.375%

In this scenario, considering both supply and borrow transactions, the user would incur a net APY of -0.375%.