# Lending

In Superposition, lending is the act of moving an asset from a user's wallet into a shared pool of credit capital, out of which other users may borrow.  The interest that borrowers pay is continuously compounded, and routed directly to the lenders as yield on their deposits.

The lending operation produces a yield-bearing deposit note to the lender.  This note is redeemable for a share of the lending pool.  Superposition streamlines the user experience by also collateralizing this yield-bearing note in the owner’s portfolio.  The ability to pledge a note as collateral, and gain credit, Superposition makes for an efficient borrowing system where lent capital can still be used to secure debts.

The interest earned by the notes floats continuously.

### Yield

The yield a lender receives from borrower interest accrues to their share.  This yield is itself conditioned by the utilization of the broker.  In a 100% utilized broker, all of the borrower interest payments translate to yield for the lenders.  In a 50% utilized broker, only 50% of a lenders capital is actively accruing interest, and so the actual yield rate is 50% of the interest the borrowers pay.

$$
Yield = Utilization \* APR
$$

In the ordinary case, where a broker is not 100% utilized, borrowers will pay a higher interest rate than the yield acquired by lenders.  This spread between rates is due to the <100% utilization of lent capital.

### Right of withdrawal

A holder of a lending share can attempt redemption at any time.  However, there is an outside possibility that the redemption may not be processed.  If the broker is 100% utilized (meaning that all of the lent capital is loaned out), there is no liquidity available in the broker to return to the lender in exchange for redemption of the shares.  In in this event, the lender must wait for borrowers to repay their debts before the lender can reclaim the capital.  Brokers are hence encouraged to schedule high interest rates at high utilization in order to incentivize fast repayment of loans.

### Tutorial


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