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# Pay-in-Advance Model

The Pay-in-Advance Lending Pools will be aggregated pools based on the underlying of the LPs. To understand the unique appeal of Vaultka's lending mechanism, it's pivotal to focus on

**three**defining features:-
**Performance Correlation**: The rewards for the lending pool derive directly from the performance of its linked vault. -
**Protected Minimum**: The rewards lenders receive will never fall below a defined expected amount and can only increase.

- Traditional systems with fixed borrowing costs often do not account for variable asset performance. With Vaultka, a better-performing linked vault translates to higher rewards for lenders.

$\small Bonus Reward = max(0, Rw-Base Reward ±Redistributor Balance Adjustment)$

where

$Rw$

denotes the total rewards from all positions in the past week- Asset performance can be volatile. The pay-in-advance model solidifies upcoming rewards before they materialize, distributing them to lenders on an hourly basis.

- Lenders benefit from the upside without the associated risks of underperformance. Vault users assume the risks, ensuring lenders always receive positive rewards.

$Base Reward = \frac {Rq×(1-SD)}{90} × 7$

where

$Rq$

denotes the total rewards from all positions in the previous quarter
SD represents the daily standard deviation in percentage

$Total Reward = BaseReward + Bonus Reward$

- If the actual reward from the previous week exceeds the base reward, the surplus (after adjusting for any credits/debits in the Vaultka redistributor) is shared as a bonus.
*(Scenario 1)* - Should the past week's rewards be lower than the base reward, the lending pool still receives the base reward. Any shortfall is recorded against the Vaultka redistributor balance.
*(Scenario 2)* - The total Reward will be adjusted based on the balance of the redistributor
*(scenario 3)*

- Annotations:

$Rq$

denotes the total rewards from all positions in the previous quarter

$Rw$

denotes the total rewards from all positions in the past week

$SD$

represents the daily standard deviation in percentage

$TVL$

stands for the total value locked from realized positions

$\Delta Ru$

signifies the change in unrealized positions

$\sum$

is the mathematical representation for summation

- APR:

$BaseAPR = \frac {BaseReward} {TVL}$

$Bonus APR = \frac {Bonus Reward} {TVL}$

- Determining Actual Reward:

$\small ActualReward=\sum TotalRewardSplitFromRealizedPositionsInLinkedVaultsOverThePastWeek$

Last modified 2mo ago