> For the complete documentation index, see [llms.txt](https://docs.extended.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.extended.exchange/extended-resources/money-market.md). # Money Market For information only. Eligibility and jurisdictional restrictions apply. Trading involves risk of total loss. See the Terms, Risk Statement and Restricted Countries. ### Overview Extended’s multi-asset collateral margin is powered by a native money market. The current implementation enables borrowing USDC against other collateral assets for trading perpetuals. However, it does not yet allow: * users to borrow and withdraw USDC, as borrowing is currently restricted to use within Extended. * borrowing of assets other than USDC Once USDC borrowing within the platform is proven to be stable, USDC borrow-and-withdraw functionality will be enabled to support broader DeFi use cases. In the current implementation, a negative USDC balance is created either by trading losses or by withdrawing unrealised profit on a market where unrealised PnL withdrawal is enabled: * If a user has a negative USDC balance offset by non-stablecoin collateral (excluding XVS), the user is considered to be borrowing USDC and pays interest on that amount. * If a negative USDC balance is offset by XVS, no interest is charged. XVS represents a claim on the vault’s equity and can be converted into USDC under normal conditions. * If a negative USDC balance is offset by the unrealised profit of the position it was withdrawn against, no interest is charged for as long as the position continues to cover it. Borrowing is measured against the net non-spot value of the account rather than the raw USDC balance, so a covered position borrows nothing. Interest begins only once the position's value falls below the amount withdrawn — for example if the market moves against the user, or the position is reduced without repaying — and applies to the uncovered portion only. The vault acts as the primary lender, accruing interest paid by USDC borrowers and distributing it to depositors as [Extra Yield](/extended-resources/vault.md#extra-yield). ### Interest Rate Model #### Rate Determination The borrowing rate for USDC depends on both: * overall utilisation of the vault (global utilisation) * utilisation of the vault against each specific collateral asset (asset utilisation) As a result, borrowing rates may vary depending on the collateral used. > For example, if the optimal overall utilisation of the USDC lending pool is set at 50% and the asset-specific optimal utilisation at 20%, then: > > * if 20% of the lending pool is lent against BTC, and > * only 5% is lent against ETH, > > the interest rate for borrowing USDC against ETH will be lower than for borrowing against BTC. The interest rate is paid approximately every 15 minutes and is defined as **max(Asset Rate, Global Rate),** where: * Global Rate: depends on total utilisation of the vault * Asset Rate: depends on utilisation of the vault against a given collateral asset Both Global Rate and Asset Rate are updated approximately every minute and recalculated based on elapsed time. #### Interest Rate Curve Both Global Rate and all Asset Rates follow a simple interest rate curve defined by: * **C** (rate at 100% utilisation): 900% * **B** (rate at target utilisation): C / 120 = 7.5% * **A** (rate at 0% utilisation): C / 250 = 3.6%
Target utilisation at launch: * Global utilisation (vault): 10% * Per-asset utilisation: 10% for BTC, ETH, USDT and 5% for EURC #### Curve Adjustment Mechanism The interest rate curve is dynamically adjusted when utilisation deviates from the target by more than 1 percentage point. The adjustment is applied to C (the borrowing rate at 100% utilisation) at a rate of 0.1% annualised per minute per 1% of excess deviation, scaled by the time elapsed since the last update. 
If |Current Utilisation − Target Utilisation| > 1%:

    If Current Utilisation − Target Utilisation > 1%:
        EffectiveDeviation = Current Utilisation − Target Utilisation − 1%

    If Current Utilisation − Target Utilisation < -1%:
        EffectiveDeviation = Current Utilisation − Target Utilisation + 1%

    C(n+1) = clamp( C(n) + EffectiveDeviation × 0.001% × Δt , 360% , 900% )

Otherwise:

    C(n+1) = C(n)
#### Interest application As described above, the interest rate a user pays depends on the collateral assets against which they borrow USDC. If a user has multiple assets serving as collateral, borrowing is allocated from the lowest-rate collateral to the highest-rate collateral. > For example: > > * Current USDC borrowing rates by collateral: > * BTC 10% APY > * ETH 5% APY > * USDT 1% APY > * User collateral: > * $100K BTC > * $50K ETH > * $50K USDT > * User has −$175K uPNL on their perp position and is borrowing 175K USDC > * The annualised interest payment is calculated as follows (lowest rate first): > * $50K @ 1% (USDT) → $500 > * $50K @ 5% (ETH) → $2,500 > * $75K @ 10% (BTC) → $7,500 > * Total annualised interest is $10,500 and effective borrowing rate is \~6.0% (10,500/ 175,000 × 100)