Lending

Lending & Borrowing on LayerBank

How LayerBank Works

LayerBank is a decentralized money market built on an over-collateralized lending model, allowing users to:

  • Supply assets and earn interest

  • Borrow against their collateral

  • (Soon) Earn $ULAB rewards for participating in the market


lTokens (Interest-Bearing Tokens)

When users supply assets to LayerBank, they receive lTokens representing their share of the pool.

  • Initial Exchange Rate: lTokens start at 1:1 with the underlying asset (e.g., 1 USDC = 1 lUSDC).

  • Accrued Interest: Over time, the exchange rate increases as interest accrues (e.g., 1 USDC = 1.03 lUSDC).

  • Redemption: When withdrawing, users redeem lTokens for their share of the underlying asset plus accrued interest.

lTokens effectively track your position and the interest earned automatically.


Borrowing & Collateral

To open a borrow position, users enable collateral on their supplied assets.

  • Borrow Limit: Determined by the Max LTV (Loan-to-Value) of the collateral.

  • Interest Accrual: Borrowed amounts grow over time according to the Borrow APR.

  • Example:

    • Deposit 100 USDC → Receive lUSDC representing your deposit

    • Borrow 50 USDC → Owed amount grows as interest accrues

    • To close the position, repay the borrowed amount (plus interest) and withdraw remaining collateral

Risk Note: If the collateral value drops and exceeds the Max LTV threshold, the position can be partially liquidated to maintain solvency.


Dynamic Interest Rate Model

LayerBank operates in a fully on-chain, code-driven environment with no intermediaries.

  • Utilization-Based Rates: Borrow/Supply APRs adjust automatically according to pool utilization.

  • Goal: Keep liquidity healthy — higher rates at high utilization attract more suppliers and encourage debt repayment.

  • Result: A self-balancing money market with optimized capital efficiency.


Key Benefits

  • Trustless & Automated: 100% smart contract based, no centralized custody

  • Capital Efficiency: Borrow up to the Max LTV while keeping collateral secure

  • Transparent Yield: lTokens make interest accrual transparent and verifiable on-chain

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