Understanding Supply APY and Protocol Parameters

Your total supply APY has two parts: base APY and rewards APY.

Base APY comes from interest paid by borrowers. It's earned automatically and compounds through your mToken balance growth, so you don't need to take any action.

The higher the borrowing demand, the higher the base APY tends to be.

Rewards APY represents additional incentive tokens (like WELL or MFAM) that Moonwell distributes to suppliers. Unlike base APY, rewards APY doesn't auto-compound.

You must claim these rewards manually for them to appear in your wallet. Once claimed, you can re-supply them to earn additional interest.

Market utilization is calculated as borrowed amount divided by total supply. It tells you what percentage of the supplied assets are currently being borrowed.

When utilization increases, interest rates rise to encourage more lending. When it decreases, rates fall to encourage more borrowing.

Moonwell uses interest rate models to adjust rates based on market utilization. These models automatically raise or lower the interest rate you earn based on supply and demand.

You don't need to understand the technical details. The key takeaway: higher utilization generally means higher APY for your supplied assets.

The collateral factor is the percentage of your supplied value that can be used as borrowing power. For example:

Different assets have different collateral factors based on their risk profile. Stablecoins like USDC typically have higher collateral factors (80 to 90%) than volatile assets like ETH (70 to 80%).

Collateral factor only matters if you want to borrow. If you only supply assets, you can ignore it.