Docs
  • ⛵Lodestar Finance
  • Getting Started
    • 👨‍🌾User Guide
    • ❓FAQ
    • 🏗️Deployed Contracts
  • Documentation
    • 👩‍🔬Technical Overview
      • Supply
      • Collateral
        • Collateral Factors
      • Borrow
      • Interest
        • Interest Rate Model 1
        • Interest Rate Model 2
        • Interest Rate Model 3
        • Interest Rate Model 4
        • Interest Rate Model 5
      • Reserves
        • Reserve Factors
        • Rake
      • Liquidation
      • Staking
        • Emission Gauge Voting
      • Looping
    • 🤖Contracts
      • Lens
      • Comptroller
        • LODE Emissions
        • Events
        • Error Reporting
      • Oracles
      • Interest Rate Models
        • Constructor Arguments
      • lTokens
        • Market and Account State
        • Events
        • Error Reporting
    • ⚙️API
    • 🔐Security
    • 🗺️Roadmap
    • 🥚Inception
  • Tokenomics
    • 🧭LODE
  • Links
    • Twitter
    • Discord
    • Medium
    • Github
    • Lodestar Website
    • Lodestar dApp
    • Lodestar Liquidity Mining
    • LODE Token Claim for Aelin Supporters
Powered by GitBook
On this page
  • Why do Reserves exist?
  • How do Reserves work?
  1. Documentation
  2. Technical Overview

Reserves

A portion of all interest paid is directed to Lodestar's reserves.

PreviousInterest Rate Model 5NextReserve Factors

Last updated 1 year ago

Why do Reserves exist?

Reserves act as a backstop to the protocol, acting as insurance liquidity for a respective market. The is the portion of borrower interest paid that is set aside and this number is a parameter set by Lodestar. Reserves are stored within each respective lToken contract.

Reserves operate just like any other deposit into the protocol and can be withdrawn by other users or by the protocol with the reduceReserves function in the lToken contract. This is the mechanism by which protocol fees will be charged. Reserves can provide extra liquidity in the market in periods of high utilization and help protect the protocol keep bad debt from accruing.

How do Reserves work?

When a borrower repays a loan and calls the accureInterest function, a portion of interest paid equal to the reserve factor is retained by the lToken contract and the remained of interest paid is accrued as interest to depositors.

Here is a quick example to understand how reserves work inside the protocol:

  • A hypothetical account repays a USDC loan and calls the accureInterest function, they are charged $100 in interest. $93 in interest is accrued for depositors of that asset and 7$ of that interest is retained by the protocol in reserves.

The amount of reserves can be viewed in the lToken contract for the respective asset using the totalReserves function. This returns a uint representing the total reserves denominated in the underlying asset.

👩‍🔬
Reserve Factor