PredMart > Documentation > Lending (Supply USDC)

Lending (Supply USDC)

Lending on PredMart is the process of depositing USDC into the protocol's lending pool to earn yield. When you supply USDC, you are providing liquidity that borrowers can use to take loans against their Polymarket shares. In return, you receive a share of the interest payments that borrowers pay on their outstanding loans.

This page explains every aspect of the lending process — how deposits work, what pUSDC vault shares are, how yield accrues, how to withdraw, and what risks lenders face.

How Lending Works

PredMart's lending pool is built on the ERC-4626 tokenized vault standard — an Ethereum standard specifically designed for yield-bearing vaults. This standard defines a common interface that makes PredMart's vault shares composable with other DeFi protocols and tooling.

When you deposit USDC into the pool, the smart contract mints pUSDC (PredMart USDC) vault shares to your wallet. These shares represent your proportional ownership of the total pool. As borrowers pay interest, the total pool value grows, and the value of each pUSDC share increases accordingly.

The Core Mechanism

Here's how the lending pool operates at a fundamental level:

  1. Lenders deposit USDC → The pool's totalAssets increases, and pUSDC shares are minted to the lender.
  2. Borrowers take loans → USDC leaves the pool's available balance but remains counted in totalAssets (as outstanding debt).
  3. Interest accrues → The totalBorrowAssets grows continuously as borrowers owe more over time. This increases totalAssets.
  4. Lenders withdraw → pUSDC shares are burned, and the lender receives their proportional share of the pool — which is now larger due to accrued interest.

The key insight is that totalAssets = available USDC in the pool + total outstanding debt. As interest accrues on the debt, totalAssets grows, making each pUSDC share worth more USDC than when it was minted.

Depositing USDC

Step-by-Step Process

  1. Navigate to the Lending page on predmart.com/lending
  2. Approve USDC spending (first time only): If you haven't previously approved the lending pool contract to spend your USDC, you'll be prompted to do so. This is a standard ERC-20 approval transaction.
  3. Enter the deposit amount: Specify how much USDC you want to deposit into the pool.
  4. Confirm the transaction: Review the details in your wallet and confirm. The transaction will: - Transfer your USDC from your wallet to the lending pool contract - Mint pUSDC vault shares to your wallet
  5. Receive pUSDC shares: Once the transaction is confirmed on-chain, you'll see your pUSDC balance in your wallet and on the PredMart interface.

Below is the deposit interface. In this example, the user is supplying 10 USDC. The panel shows the current deposit value ($16.71), interest already accrued ($2.01), and the current APY (0.04%). No fees are charged for depositing.

Supply USDC interface

How Many pUSDC Shares Do I Receive?

The number of pUSDC shares you receive depends on the current exchange rate between USDC and pUSDC. This rate is determined by the following formula:

shares = deposit_amount × total_pUSDC_supply / total_pool_assets

When the pool is first created, the exchange rate starts at 1:1 (with a decimal offset). Over time, as interest accrues, the exchange rate shifts — each pUSDC share becomes worth more USDC.

Example: - The pool currently holds 100,000 USDC in total assets - There are 95,000 pUSDC shares outstanding - The exchange rate is: 1 pUSDC = 100,000 / 95,000 = 1.0526 USDC - If you deposit 10,000 USDC, you receive: 10,000 / 1.0526 = 9,500 pUSDC shares - Your 9,500 pUSDC shares are immediately worth 10,000 USDC — but over time, they'll be worth more as interest continues to accrue

Decimal Offset

PredMart's vault uses a decimal offset of 6 for pUSDC shares. While USDC has 6 decimals, pUSDC has 12 decimals (6 + 6). This offset is a standard practice in ERC-4626 vaults to prevent a class of rounding attacks known as "inflation attacks." It does not affect the value of your deposit — it's purely a precision enhancement at the smart contract level.

Understanding pUSDC Vault Shares

What Are pUSDC Shares?

pUSDC is an ERC-20 token representing your ownership of the lending pool — like a mutual fund share. It's transferable, yield-bearing (12 decimals), redeemable for USDC at any time, and composable with other DeFi protocols. The value of 1 pUSDC starts at ~1.0 and grows as interest accrues — it only decreases if bad debt occurs (see Risks for Lenders).

How Yield Accrues

Interest Income

All yield in PredMart's lending pool comes from borrower interest payments. When a borrower takes a USDC loan, they pay interest at a rate determined by the protocol's interest rate model. This interest accrues continuously (calculated per-second) and is added to the pool's total assets.

Supply APY

The Supply APY (Annual Percentage Yield) that lenders earn is directly derived from the borrow rate and the pool's utilization:

Supply APY = Borrow APR × Utilization Rate × (1 - Reserve Factor)

Where: - Borrow APR is the annual interest rate borrowers pay (see Interest Rates) - Utilization Rate is the percentage of the pool that is currently lent out (total borrowed / total assets) - Reserve Factor is the protocol fee (see Protocol Constants). This portion of interest income goes to PredMart's protocol reserves rather than to lenders.

Additionally, lenders receive a share of the 10% profit fee collected when leveraged positions close with gains (split between lenders and the protocol — see Protocol Constants).

Why Supply APY is Lower Than Borrow APR

(1) Utilization dilution — idle USDC earns nothing, so interest from borrowed funds is diluted across the full supply. (2) Reserve factor — a portion goes to protocol reserves.

Real-Time Accrual

Interest in PredMart accrues continuously — not daily, not hourly, but every second. Technically, the contract calculates interest at the per-second level each time a state-changing function is called (borrow, repay, deposit, withdraw, etc.). Between interactions, interest is "virtual" — it's owed but hasn't been formally recorded. The moment anyone interacts with the contract, all pending interest is settled and reflected in the pool's state.

This means: - Your pUSDC value is always up-to-date (the contract calculates the latest exchange rate on every call) - There's no "interest payment date" — yield is continuous - You start earning interest the moment your deposit transaction is confirmed

Withdrawing USDC

How to Withdraw

  1. Navigate to the Lending page
  2. Switch to the Withdraw tab
  3. Enter the amount of USDC you wish to withdraw
  4. Confirm the transaction in your wallet
  5. The contract will burn your pUSDC shares and transfer the corresponding USDC to your wallet

Below is the withdrawal interface. The user is withdrawing 10 USDC from their lending position. The maximum available balance is shown at the top right.

Withdraw USDC interface

Withdraw vs. Redeem

The ERC-4626 standard provides two ways to exit:

Both achieve the same result — you're exchanging pUSDC for USDC. The difference is just which side of the equation you specify.

Available Liquidity

You can withdraw USDC that's currently sitting idle in the pool — not the portion lent out to borrowers. At high utilization, large withdrawals may be temporarily limited until borrowers repay or new lenders deposit. The steep interest rate above 80% utilization is specifically designed to break those situations fast: rates spike, borrowers repay, new lenders rush in, available liquidity returns.

Monitoring Your Position

Pool Statistics

The Lending page displays real-time metrics: Total Supplied, Total Borrowed, Available Liquidity, Utilization Rate, Supply APY, and Borrow APR.

Your Position

Your individual position shows: pUSDC Balance, USDC Value, and Yield Earned.

Rate History Charts

Historical rate charts are available for 1 Week, 1 Month, and 6 Months — useful for understanding rate trends.

Risks for Lenders

Lending on PredMart carries certain risks that you should understand before depositing:

Bad Debt Risk

Bad debt occurs when a borrower's position becomes "underwater" — meaning the value of their collateral falls below their outstanding debt. When this happens during liquidation, the debt that cannot be recovered is socialized across all lenders in the pool.

In practical terms, bad debt reduces totalAssets without a corresponding reduction in pUSDC supply, which decreases the exchange rate. All lenders share the loss proportionally to their pool ownership.

PredMart mitigates bad debt risk through several mechanisms: - Conservative LTV ratios: The flat 80% LTV ensures that borrowers cannot take on excessive leverage relative to their collateral value. - Liquidation buffer: The liquidation threshold (85%) is set 5% above the LTV ratio (80%), providing a cushion before bad debt occurs. See Protocol Constants. - Real-time liquidation: The liquidation engine responds within seconds of a price drop, minimizing the window for positions to go underwater. - Per-market borrow caps: Limits borrowing against thin markets to amounts that can be efficiently liquidated.

Utilization Risk (Temporary Illiquidity)

If pool utilization is very high, you may not be able to withdraw all your USDC immediately. Your funds are not lost — they are lent to borrowers — but you may need to wait for borrowers to repay or for utilization to decrease.

The kinked interest rate model is specifically designed to address this: once utilization exceeds the kink, interest rates increase dramatically, creating strong economic incentives for borrowers to repay and for new lenders to deposit. See Protocol Constants for exact values.

Smart Contract Risk

As with any DeFi protocol, there is a risk that a bug or vulnerability in PredMart's smart contract could lead to loss of funds. PredMart mitigates this through careful development practices, but users should be aware that no smart contract system is completely risk-free.

Market-Wide Risk

In a scenario where multiple Polymarket markets resolve unfavorably for borrowers simultaneously, the pool could experience significant bad debt. While the probability of this is low (due to the diversity of markets and positions), it represents a tail risk for lenders.

FAQ for Lenders

Next Steps