Interest Rates
This page will answer questions regarding the yields posted and interest payments
Table of Contents
Setting Interest Rates
Lila Finance first selects a protocol to serve as the underlying yield-generating protocol. For example, AAVE allows users to lend their money at a variable rate. Our yield comes from AAVE or the specified protocol on each card.
After selecting a protocol, Lila Finance calculates the historical average APY for each of the three maturities (30, 90, and 180 days). Then, based on interest rate volatility, Lila subtracts a percentage from that average and offers the newly calculated rate on the site.
Sometimes, the posted yield will be higher than the true yield over a certain maturity, in which case Lila loses money. Other times, when the true interest rate is at or above the fixed interest rate posted, Lila does not lose money. In either case, the user always earns the fixed income posted by the site. The protocol fronts the fixed income after a user creates positions and uses that money to pay users every month.
Paying Users
All interest payouts are done in the asset that the user deposits. That is, USDC positions will be paid in USDC, and ETH payments will be paid in ETH. While the USD value of the tokens may fluctuate due to market conditions, Lila Finance users will always see an increase in the quantity of their assets and never a loss.
Fees
Lila Finance takes no fees from user deposits or earnings for the interest rate swap function.
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