Lend/Borrow FAQs
Backpack features an omnichain money market where users can lend and borrow a variety of assets.
Looking for in-depth walkthroughs? Check out our Backpack Guides and Tutorials at Learn.Backpack.Exchange or our trading system docs at here.
How are interest rates calculated for lending and borrowing?
Interest rates on Backpack Exchange are determined dynamically based on the utilization rate of the asset pool. Higher utilization rates lead to higher interest rates, making lending more profitable and borrowing more expensive.
The rates are displayed in real-time within the Lend & Borrow Info section, so you can stay informed of any changes.
What arbitrage strategies can be used with lending and borrowing?
If you’re bullish on an asset, you can choose to collateralize that asset and borrow USDC. Then, use the borrowed USDC to purchase the asset on the spot market. Once the asset appreciates to your target price, you can sell it and repay the loan.
If you’re bearish on an asset, and you still have available equity in your account, you can borrow the asset you expect to decline in value and immediately sell it. When the price drops to your target level, you can buy it back and repay the loan.
As for stablecoin arbitrage: you can collateralize one type of stablecoin (e.g., USDC) to borrow another stablecoin with a lower interest rate (e.g., USDT), and then deposit the borrowed stablecoin into a protocol offering a higher lending yield—thereby profiting from the interest rate spread.
What are the risks associated with lending and borrowing on Backpack Exchange?
For Lenders
The main risk is that market conditions or utilization rates may change, potentially affecting the yield on your lent assets.
For Borrowers:
The value of your collateral could decrease, resulting in a lower margin level and the risk of liquidation. Additionally, fluctuating interest rates can impact the cost of borrowing.
It’s crucial to understand these risks and manage your positions accordingly.
How do I view my lend and borrow activity?
You can view your lend and borrow activity in the Lend & Borrow Info section. Here, you’ll see details such as the total amount lent or borrowed, current interest rates, and accrued interest.
Use this dashboard to manage your lending and borrowing strategies effectively.
How to differentiate between account balance, net equity, and available equity？
Account Balance It represents the real-time value of your account, taking into account any gains or losses from open positions.
Net Equity
This refers to the risk adjusted dollarized value of all of the collateral in your account. Also known as your margin balance.
Net Equity = ∑ (Collateral Asset × Haircut Rate) + Unrealized PnL (profit and loss).
Note：Different assets have different haircut rates, and these rates may fluctuate based on changes in the value of the collateral.You can click on the haircut value next to each asset to view detailed information.
Available Equity (Remaining Equity) This is the portion of your net equity that is not being used as margin or collateral. It reflects how much equity is still available for borrowing or opening new positions.
Net Equity Available = Net Equity – Net Equity Locked
Didn't find what you needed here? Check out our in-depth Backpack Guides and Tutorials at Learn.Backpack.Exchange or our trading system docs here.
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