💵Money Market

Decentralized money markets facilitating the borrowing and lending of crypto assets have proven to be highly successful in DeFi. These markets typically employ overcollateralized lending rules to ensure secure yields, enabling users to borrow and lend without intermediaries such as banks. Smart contracts set prevailing interest rates, creating a predictable market environment.

XYM seamlessly integrates a money market directly into the DEX. Users can automatically borrow spot assets using their portfolio margin to secure loans. The smart contracts governing the money market are on-chain and housed within the XYM risk engine and clearinghouse.

Interest Rates Depositors serve as liquidity providers (LPs) to the pool, earning a proportional share of prevailing interest rates paid by borrowers. This mechanism allows for passive yield on deposited idle assets, providing XYM users with automatic interest earnings. Borrowing and lending for a specific asset occur at the prevailing interest rate in the pool, influenced by both demand to borrow and liquidity of the asset pool.

XYM employs a dynamic interest rate model that adapts to real-time demand in collateral pools.

Technical Parameters of XYM's Money Market include:

  1. Collateralization: A crucial parameter ensuring a safe and secure lending process. Borrowers must provide a specified amount of collateral in crypto assets, maintained at a predetermined minimum level during the loan period. This collateral is held in a smart contract until the borrower repays the loan.

  2. Dynamic Interest Rate: Essential for healthy borrowing and lending, the interest rate in XYM's decentralized money market is determined by the supply and demand of assets. The dynamic interest rate is determined by an algorithm considering current market conditions, adjusting the rate accordingly. As demand for loans increases, the interest rate rises, and if there's an excess of lenders, the rate decreases to incentivize more borrowing.

The dynamic interest rate calculations for XYM's integrated money market are expressed below.

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