# Supply Rates

#### **Supply Rates on Echelon**

Echelon’s supply rate is derived from borrower interest payments, ensuring that lenders earn a proportional share of the yield generated from borrowing activity. A portion of this yield is allocated to the protocol’s liquidity reserves through the **Reserve Factor**, while the remainder is distributed to suppliers. This mechanism sustains protocol liquidity while incentivizing lenders to contribute assets.

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#### **How Supply Rates Are Determined**

The **Supply Annual Percentage Yield (APY)** is influenced by several key factors:

1. **Utilization Ratio** – The proportion of supplied assets that are actively lent out.
   * **Higher utilization** increases supply rates, as more interest is paid by borrowers.
   * **Lower utilization** results in lower supply rates due to reduced borrower demand.
2. **Variable Interest Rate** – The dynamic interest rate applied to loans, which adjusts based on market conditions and asset utilization.
3. **Reserve Factor** – A percentage of borrower interest that is redirected to the **protocol’s liquidity reserve**, reducing the total yield distributed to suppliers.

Additionally, supply rates may be **subsidized by token incentives**, which vary on a **pool-by-pool basis** to enhance lender returns.

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#### **Viewing Supply Rates**

The most up-to-date **Supply APY** for each asset is displayed on the **Core Markets interface**. Users can check live rates and pool-specific incentives to optimize their lending strategy.