Depositing stablecoins

Lenders deposit whitelisted stablecoins to the Primary Lending Facility’s Primary Capital Pool. This mints a proportional amount of interest-bearing fTokens, which are given to the Lenders in return for their deposit.
The Primary Capital Pool is composed of separate markets of each whitelisted stablecoin. Unlike an exchange or peer-to-peer platform, where a Lender’s assets are matched and lent to a Borrower, the Fringe Finance protocol aggregates the supply of Lenders’ assets; when a Lender supplies an asset, it becomes a fungible resource. This approach offers significantly more liquidity than direct lending. Unless every asset in a market is borrowed, Lenders can withdraw their assets at any time, without waiting for a specific loan to mature.

Receiving interest

Assets supplied to a market are represented by an ERC-20 token balance (“fTokens”), which reflects the deposited underlying asset. As the money market accrues interest, which is a function of borrowing demand, fTokens become convertible into an increasing amount of the underlying asset. In this way, earning interest is as simple as holding an ERC-20 fToken.
Indeed, a holder of fTokens does not need to redeem them on the Fringe Finance platform to regain their deposited stablecoin assets — they can instead sell the fTokens on the open market for whatever asset they wish, as long as an external market exists.

Withdrawing stablecoins

Lenders redeem their fTokens to withdraw stablecoins from the Primary Capital Pool. Their fTokens reflect the interest they have earned by an increase in the redemption rate of fTokens since they received them.