> ## Documentation Index
> Fetch the complete documentation index at: https://docs.derive.xyz/llms.txt
> Use this file to discover all available pages before exploring further.

# Borrow Markets

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

```python Formula theme={null}
Utilization = totalBorrow/(totalSupply - min(0,netPrint))
```

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:

```python Formula theme={null}
Interest Rate =

if Utilization < OPTIMAL_UTIL:
		MIN_RATE + Utilization / OPTIMAL_UTIL x LOW_SLOPE

if Utilization > OPTIMAL_UTIL:
		MIN_RATE + LOW_SLOPE + (Utilization - OPTIMAL_UTIL) / (1 - OPTIMAL_UTIL) x HIGH_SLOPE
```

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 on`netPrint`:** 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:

```text theme={null}
balanceOf + netPrint = totalSupply + totalBorrow
```

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.

## 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.


## Related topics

- [public/get_interest_rate_history](/api-reference/market-data/publicget_interest_rate_history.md)
- [Trading Fees on Derive: Maker, Taker, RFQ, and Liquidation](/integrators/trading/trading-fees.md)
- [Managers & Risk Universes](/trading/managers-and-risk-universes.md)