Lending

Introduction to Lending

Lending is a core function of Fervent Finance, allowing users to deposit their digital assets and earn passive income in a fully decentralized way on the Kaspa blockchain. Whether you're new to DeFi or a seasoned investor, this guide will help you understand how lending works on Fervent Finance.

How Lending Works on Fervent Finance

When you supply assets to Fervent Finance, you are providing liquidity to a lending pool. Other users can borrow those assets by locking up collateral. In return for providing liquidity, lenders earn interest that accrues automatically over time.

Each asset has its own pool and market, inspired by the Compound v2 model.

• You deposit assets → you receive a cToken representing your share (e.g., fKAS, fUSDT)

• Interest is earned over time as borrowers pay interest

• You can withdraw your assets + interest anytime, as long as liquidity is available

Understanding Interest Rates

Fervent uses a dynamic interest rate model based on supply and demand:

• As more assets are borrowed (high utilization), interest rates increase

• As utilization drops, interest rates decrease

This ensures lenders are incentivized properly and pools stay healthy.

Collateral & Borrowing

To borrow, users must supply collateral. Each asset has its own collateral factor which determines how much you can borrow against it. For example:

If KAS has a collateral factor of 70%, depositing $100 of KAS lets you borrow up to $70 worth of other assets.

Collateral factors keep the protocol solvent and protect lenders.

Liquidation Mechanism

If the value of your collateral falls and your borrowed amount exceeds your allowed limit, your position becomes eligible for liquidation.

• Liquidators repay part of your debt and receive collateral at a discount

• This helps keep the protocol solvent and incentivizes market participants to maintain system health

Benefits of Using Fervent Finance

• Passive Income Opportunities – Earn interest by simply supplying your assets

• Permissionless Access – No KYC or middleman required

• Capital Efficiency – Use your idle assets as collateral to borrow and earn simultaneously

• Flexible Withdrawal – Withdraw supplied assets at any time (subject to liquidity availability)

• Transparent & Audited – Based on Compound v2 architecture