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The quote asset has an intrinsic lending market built into it: users holding long option positions and/or the underlying assets will be able to borrow USDC, entering into a debit (negative) cash balance. Further, in V3, this two sided lending extends to assets beyond USDC. The specific assets this will apply to will be released shortly. For the rest of this page, we use the example of USDC, but the same logic applies to borrowed base assets. Users with debited cash pay interest on their balance. Interest accrued from accounts in debit is then distributed to credited (positive cash) accounts. The Security Module of the universe takes a share of SM_FEE = 20% of all interest paid to positive cash holders. This increases to 100% if that universe’s Security Module is depleted.
📘 Lending pools are per universe. A pool is keyed (asset, risk universe), so utilization, the interest rate and the available liquidity are all computed within a universe. USDC supplied in one universe does not fund borrowing in another.
The more negative cash (borrowing) taking place, the higher the interest rate paid by borrowers. The utilization of USDC in a universe is defined as the following ratio
Formula
where
  • totalSupply is the sum of all positive cash balances in the universe
  • totalBorrow is the sum of all negative cash balances in the universe
  • netPrint is a extra factor used to deal with asymmetric USDC balances around settlement. The vast majority of the time this should be near 0 and will not play a meaningful role in the value of Utilization.
The interest rate on debit balances is calculated with the following piece-wise function:
Formula
Note that interest is continuously settled, meaning that a user’s interest can be settled at any point in time. It is important to realize that if there is substantial borrowing, traders might not be able to immediately withdraw their USDC. In this very unlikely scenario, interest rates will be extremely high to disincentivize borrowing and encourage loan repayments. Users unable to withdraw in these circumstances will in turn receive a higher interest rate on their USDC balances. Detail onnetPrint: Whenever a position is settled, the other side of the trade is not necessarily automatically settled. The netPrint variable accounts for this temporary difference. For example, if Alice is long an in-the-money call and Bob is short said call, at settlement Alice might be settled 1 minute before Bob and be paid out 100 USDC. In this window,netPrint will increase by 100 as Alice’s cash balance increases by 100. When Bob is settled soon after, his cash balance will decrease by 100 and netPrint will decrease by $100. In the contracts, the following relationship always holds:
where
  • balanceOf is the total amount of USDC deposited into the universe and
  • totalSupply, totalBorrow and netPrint are defined above.
It is important to stress again that the netPrint variable only accounts for such temporary asymmetric printings. The vast majority of the time it will be small and not contribute meaningfully to the utilization and interest rate calculations.

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Borrowing Base Assets

Unlike V2, V3 lets a subaccount hold a negative balance of a supported base asset, i.e. borrow it. This makes short spot and cash-and-carry strategies expressible without a perpetual.
  • A token is borrowable only if it is flagged CAN_BORROW in its universe, and only up to that universe’s spot borrow cap for the asset.
  • Borrowing debts are generally margined more heavily than the matching long is credited.