How to Use the Supply Mechanism

Supplying Assets on the Nebeus Platform

In the Nebeus Lending Protocol, supplying assets is a critical mechanism for maintaining liquidity within the ecosystem while allowing users to earn returns on their contributions. This section provides an in-depth, technical overview of how supplying assets works and the benefits for liquidity providers.

Supplying Assets: Overview

Lenders can supply supported assets to the platform’s smart contract-powered lending pools. These contributions form the backbone of the protocol’s liquidity reserves, enabling borrowing and generating yield for suppliers. Here is how the process works:

1. Asset Deposit: Users initiate the supply process by selecting an asset and the amount they wish to deposit.

2. Approval Mechanism: The first time an asset is supplied, an approval transaction is required to grant the protocol permission to manage the asset.

3. Earnings Initialization: Upon confirmation, the supplied assets are registered in the pool, and the user begins earning interest.

nTokens in Lending Liquidity Pools

nTokens are tokenized representations of a lender’s supplied assets within the Nebeus Lending Protocol. They serve as proof of contribution to the liquidity pool and offer additional functionality:

1. Earning Interest:

   • nTokens continuously accrue interest based on the pool’s APY. The interest is directly reflected in the nToken’s value, ensuring that lenders benefit proportionally from their contributions.

2. Flexibility in Liquidity Usage:

   • Lenders can use nTokens within the Nebeus ecosystem or across other DeFi platforms that support them, enabling seamless integration without withdrawing assets.

3. Transferability:

   • nTokens can be transferred between users, allowing flexibility in managing liquidity positions.

4. Redemption:

   • At any time, nTokens can be redeemed for the underlying supplied assets, along with accrued interest, provided sufficient liquidity is available in the pool.

Earnings for Liquidity Providers

Liquidity providers are rewarded with NELX tokens, which represent their share of the platform’s yield. These tokens can be redeemed for cryptocurrency or stablecoins without any commission. Additionally, they can be converted into fiat currency through Nebeus or linked to a Mastercard for direct usage.

Key Earning Mechanisms:

• Borrowing Interest Payments: A portion of the interest paid by borrowers is distributed to lenders. Yield is calculated using:

  Yield = Pool Utilization Rate × Total Borrowing Interest Rate × (1 - Reserve Factor)

  Higher reserve utilization results in greater returns for suppliers.

• Asset-Specific APY: Each asset’s supply and demand dynamics define its Annual Percentage Yield (APY). APYs evolve based on market conditions, and lenders can monitor trends using a 30-day average rate displayed in the platform’s reserve overview.

Utilization Rate

The utilization rate is a vital metric that reflects the proportion of a platform’s available assets that are actively loaned out. It is a dynamic indicator, varying with borrower demand and supplier activity.

• Definition: Utilization Rate = (Loaned Assets / Total Available Assets) × 100%.

• Impact: A higher utilization rate indicates greater demand for borrowing, leading to increased earning potential for suppliers.

Minimum and Maximum Supply Limits

1. No Minimum Supply: Users can supply any amount of assets. However, small deposits should consider transaction costs, as fees may outweigh potential earnings.

2. Supply Cap: Certain assets may have a supply cap to maintain protocol stability. Caps are determined by NELX Governance and prevent oversaturation in specific pools.

Withdrawing Supplied Assets: Lenders Can Withdraw Assets

Lenders can withdraw their supplied assets, subject to the pool’s liquidity availability:

• Withdrawal Process:

  • Navigate to the "Dashboard" and select "Withdraw."

  • Enter the desired withdrawal amount and confirm the transaction.

• Liquidity Constraints: If the pool’s liquidity is fully utilized, withdrawals may be delayed until additional funds are deposited or borrowers repay loans.

• nToken Utility: Instead of withdrawing, users can leverage their nTokens as liquidity while retaining the benefits of their supply position.

Collateral Opt-Out Option

Lenders who do not wish to use their supplied assets as collateral can disable this functionality:

• Access the "Supply" section in the dashboard.

• Toggle off the "Use as Collateral" option for the selected asset.

Disabling collateral usage ensures that the supplied asset will not impact borrowing positions or liquidation thresholds.

Risks and Rewards for Liquidity Providers

1. Rewards:

   • Continuous earnings based on market-driven interest rates.

   • Flexibility to redeem NELX tokens without additional fees.

2. Risks:

   • Market Volatility: Significant price fluctuations can impact the value of supplied assets. This is mitigated through conservative risk parameters.

   • Smart Contract Risk: Comprehensive audits and formal verifications ensure the integrity of the platform’s smart contracts.

   • Liquidity Constraints: Dynamic interest rates incentivize balanced liquidity, ensuring sufficient reserves for both lenders and borrowers.

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Supplying assets on the Nebeus platform is a seamless and efficient way for users to participate in the DeFi ecosystem while earning competitive returns. By leveraging smart contracts, dynamic interest rates, nToken functionality, and robust risk management practices, the Nebeus Lending Protocol ensures that liquidity providers are rewarded fairly and sustainably for their contributions.