What is Supply APY?

How income is calculated on supplied assets

Users who supply collect an income from the users who borrow. This income is given in the same token as the supply and compounds with every new block that is added to the blockchain.

Both the Supply Rate (APR) and Supply APY of an asset on a specific market are calculated dynamically depending on the asset's utilization rate.

$$U = UtilizationRate = \frac{AmountBorrowed}{AmountSupplied}$$

• When the asset is available, interests are low to encourage borrowing.

• When the asset is scarce: interests are high to encourage repayments of debt and additional supplying.

The Supply APY takes into account compound interest while the Supply Rate does not.

The graph of APR and APY dependence on Utilization Rate looks like this:

Supply Rate

The Supply Rate (annual percentage rate, APR) refers to the yearly interest paid to investors without taking compounding into account.

The Supply Rate function is split in two parts around an optimal utilization rate $U_{opt}$:

$$SupplyRate = \begin{cases} U\cdot\bigg(R_0+\frac U{U_{opt}}R_{slope1}\bigg)\cdot\bigg(1 - ProtocolFee\bigg) ,&if\ U<Uopt\newline U\cdot\bigg(R_0+R_{slope1}+\frac{U-U_{opt}}{1 -U_{opt}}R_{slope2}\bigg)\cdot\bigg(1 - ProtocolFee\bigg),&if\ U\ge Uopt \end{cases}$$

Where:

• $R_0$, $R_{slope1}$, $R_{slope2}$ are asset parameters,
• ​$ProtocolFee$ ​is a share of the borrow interest rate sent to the protocol.

Supply APY​

The supplied amount grows with every new block thanks to compounding. Supply APY (annual percentage yield) is the yearly interest paid to investors including compounding interest.

Supply APY is calculated as follows:

$$SupplyAPY = \bigg(1 + \frac{SupplyRate}{BlocksPerYear}\bigg)^{BlocksPerYear} - 1$$

Since roughly one new block is added to the Waves blockchain every minute, the following calculation is used:

$$BlocksPerYear = 365\cdot 24\cdot 60 = 525,600$$