What Lending Yield Is
When your liquidity bins go inactive, your capital does not sit idle on Juncta. The protocol automatically designates that inactive bin liquidity as available for borrowers to borrow against. Borrowers pay interest on what they borrow, and a portion of that interest flows back to you as lending yield. Lending yield is the second of the two income streams available to Juncta LPs. The first is trading fees, earned when your bins are active and processing swaps. The second is lending yield, earned when your bins are inactive and your liquidity is being used by borrowers. At no point does your position require manual action to switch between these two states. The protocol handles the transition automatically on every block.How Lending Yield Is Calculated
Your lending yield is determined by two things: how much of your inactive bin liquidity is currently being borrowed against, and what the current borrow rate is for the assets in your pool. The borrow rate updates on every block and responds to three signals. Pool utilisation is the primary driver. It measures what percentage of the total available inactive bin liquidity in the pool is currently borrowed. As utilisation rises, the borrow rate rises with it to attract new lending supply. As utilisation falls, the rate falls.| Utilisation | Borrow Rate |
|---|---|
| 0% | 2% APY |
| 80% | 20% APY |
| 80% to 100% | 20% to 150% APY |
The supply rate formula
Of every dollar of interest borrowers pay, 90 cents flows to lenders. The remaining 10 cents goes to the protocol reserve. Your supply rate — the rate you actually earn as an LP — is calculated as: Supply Rate = Borrow Rate × Utilisation% × 0.90 At 70% utilisation and a 14% borrow rate, the supply rate is: 14% × 70% × 0.90 = 8.82% APY As utilisation rises, your supply rate rises with it because both the borrow rate and the utilisation term in the formula increase simultaneously. This is what makes lending yield on Juncta more attractive during periods of high borrowing demand.When You Earn Lending Yield
Lending yield begins accruing to your position the moment your bins go inactive and your pool has an active lending market. You do not need to opt in, enable a setting, or take any action. The protocol designates your idle bin liquidity as available for borrowing automatically. Lending yield accrues continuously at the current supply rate for as long as your bins remain inactive and there is borrowing demand in the pool. When price returns to your bins and they become active again, your position transitions back to earning trading fees. The transition is seamless and requires no action from you.Lending yield only accrues if your pool’s lending market is active. Newly
created pools start as DEX-only and earn trading fees but not lending yield
until they meet the activation thresholds. To learn more, see Making Your
Pool Available for
Lending.
How Your Lending Yield Is Proportional to Your Share
Your lending yield is proportional to your share of the inactive bin liquidity in the pool at any given moment. If your position accounts for 10% of the total inactive bin liquidity in the pool, you receive 10% of the lending yield generated by borrowing activity against that liquidity. This share changes continuously as other LPs add or remove liquidity, as bins transition between active and inactive states, and as the pool’s total composition shifts. Juncta’s analytics dashboard tracks your current share and your cumulative lending yield earnings updated every block.The Relationship Between Lending Yield and Impermanent Loss
Lending yield does not eliminate impermanent loss. When your bins are inactive, your position’s token composition has already shifted relative to entry because price has moved away from your range. The impermanent loss from that price movement is present regardless of whether your inactive capital is earning lending yield or sitting idle. What lending yield does is offset the cost of being out of range. A position that earns 8% APY in lending yield while its bins are inactive is in a meaningfully better position than an equivalent position on a protocol where idle capital earns nothing. The dashboard tracks both figures — gross impermanent loss and cumulative earnings from trading fees and lending yield combined — and shows you the net result so you can see whether your position is ahead of simply holding the underlying tokens.The 80/20 Utilisation Cap and What It Means for Your Yield
Not all of your inactive bin liquidity can be borrowed at once. Juncta enforces a maximum utilisation cap of 80% on inactive bin liquidity at the pool level. The remaining 20% is held as a buffer to ensure the DEX has sufficient liquidity when price returns to previously inactive regions. The practical implication for your lending yield is that your effective earning rate is based on the borrowable portion of your inactive liquidity, not the full amount. If you have 8,000 of it can be borrowed against at any time. Your lending yield accrues on the portion that is actually borrowed, not on the full $10,000. During periods of high borrowing demand when utilisation is close to 80%, a larger proportion of your inactive liquidity is borrowed and your lending yield is higher. During periods of low demand, less is borrowed and your lending yield is lower. The borrow rate also moves in the same direction as utilisation, which means both the rate and the borrowed amount tend to be higher or lower together.For a deeper explanation of how the 80/20 utilisation cap works and why it
exists, see the Juncta
Litepaper.