Incentive Eligibility & Reward Rules

XLend offers two primary incentive distribution models: Net Deposit Rewards and Supply & Borrow Rewards for lending pools. We apply these models to different lending pools based on campaign goals, risk structures, and integration stages.

1. Net Deposit Rewards

What it is:

Net Deposit Rewards are distributed based on a user's net position in a lending pool—calculated as the difference between the amount supplied and the amount borrowed within the same pool.

Formula:

Eligible Holding = Supply Balance – Borrow Balance (same pool only)

Where it's used:

This model is currently used in selected pools where we aim to reward genuine liquidity contributors, including:

• OP Mainnet: USDC, ETH and WBTC

• Base: USDC, ETH, and cbBTC

Key Rules:

• Only users with a positive net deposit are eligible for rewards.

• Borrowing assets from a different pool does not reduce your eligible holding.

• If your borrow amount exceeds your supply in the same pool, your eligible holding becomes 0, and you won't earn rewards from that pool.

Examples:

✅ Supplied 100,000 USDC, borrowed 50,000 USDC → Eligible Holding = 50,000 USDC

✅ Supplied 100,000 USDC, borrowed 50,000 DAI → Eligible Holding = 100,000 USDC

❌ Supplied 100,000 USDC, borrowed 110,000 USDC → Eligible Holding = 0 USDC

APR Display on XLend:

The APR shown on the XLend app is calculated based on your eligible holding:

APR = (Total Annual Rewards for the Pool × Eligible Holding) ÷ (Total Supply - Total Borrow)

Why it matters:

This model rewards genuine liquidity providers and prevents dilution from circular borrowing strategies. It delivers more focused and efficient rewards to users who truly contribute capital.

2. Supply & Borrow Rewards

What it is:

This model distributes rewards based on either your supply or borrow activity, depending on the specific pool’s incentive configuration. Rewards are calculated proportionally to user's contribution.

Where it's used:

This model is applied to general-purpose or newly launched pools where we aim to encourage broader participation, including:

• Base: sUSDS, weETH

These pools may transition to Net Deposit logic in future updates.

Key Rules:

• Users can earn rewards by supplying assets, borrowing assets, or both, depending on the pool configuration.

• Net deposits do not need to be positive to qualify for rewards.

• This model is typically implemented during initial launches or to encourage broader platform adoption.

Examples:

• Supplied 50,000 ETH → eligible for supply-side rewards

• Borrowed 30,000 USDC → eligible for borrow-side rewards

• Supplied 100,000 USDC and borrowed 100,000 USDC in the same pool → still eligible for both supply and borrow rewards

APR Display on XLend:

For pools using the Supply & Borrow model, APR is shown separately for each side:

Supply APR = (Total Annual Supply Rewards × Your Supply) ÷ Total Supply

Borrow APR = (Total Annual Borrow Rewards × Your Borrow) ÷ Total Borrow

Why it matters:

This model offers greater flexibility and inclusivity, allowing all participants to earn rewards more easily. However, because it doesn't prevent circular strategies, the effective APR can fluctuate based on competition levels and how users interact with the pool.