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General concepts​

LEC stands for Low Emissions Collateral. On LEC markets, borrowers can mint USG against productive collateral that produces low or zero liquid rewards, such as Curve Finance LP tokens or Pendle PTs. On these markets, a dynamic and price-dependent interest rate is charged immediately and is materialized for borrowers by an ever-increasing debt. If the collateral produces liquid rewards, 97.5% of these rewards are streamed back to borrowers, as the protocol applies a 2.5% fee. No progressive rewards deduction is applied on LEC markets. As the price of USG decreases, the interest rate increases. Considering the modularity of the interest-rate formula, each market might have its own set of parameters, and thus, the evolution of the interest rate can vary across LEC markets. However, the general behavior of the interest rate is always the same: as USG’s price goes down, the interest rate goes up.
The parameters of the interest rate formula can vary across LEC markets, depending on the collateral’s nature. Additionally, following a DAO vote, the parameters can be adjusted, and an LEC market can become an HEC market (and vice versa).
To summarize, on LEC markets:
  • Interest starts accruing immediately when a loan is created;
  • If the collateral produces liquid rewards, 97.5% of these rewards are streamed back to borrowers;
  • The interest rate goes up as USG’s price goes down.

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Example​

Below is an example of how the interest rate behaves on LEC markets, depending on USG’s price. test For more details about the interest rate model, refer to the following section:

Interest rate

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Financial flows​

The figure below shows the financial flows on LEC markets. test