# Money Market

### 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, USDC borrowing is triggered only by trading losses:

* 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.

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%

<figure><img src="/files/tkBf1jtHxzuhemMQZk9O" alt=""><figcaption></figcaption></figure>

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.

<pre><code><strong>If |Current Utilisation − Target Utilisation| > 1%:
</strong>
    If Current Utilisation − Target Utilisation > 1%:
        EffectiveDeviation = Current Utilisation − Target Utilisation − 1%

    If Current Utilisation − Target Utilisation &#x3C; -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)
</code></pre>

#### Interest application

As described above, the interest rate a user pays depends on the collateral assets against which they borrow USDC.&#x20;

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:&#x20;
>   * BTC 10% APY
>   * ETH 5% APY
>   * USDT 1% APY
> * User collateral:&#x20;
>   * $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)


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