> ## Documentation Index
> Fetch the complete documentation index at: https://docs.limora.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Interest

> How interest works for matchers on Limora

As a matcher, you earn interest from traders who hold leveraged positions. This guide explains how interest is calculated, accrued, and distributed.

***

## How Interest Works

When a trader opens a leveraged position, they effectively borrow funds from you. In exchange, they pay you interest for the duration of the position.

```mermaid theme={null}
graph LR
    T[Trader] -->|Opens Position| P[Protocol]
    M[Matcher] -->|Provides Funds| P
    P -->|Continuous Interest| M
    T -->|Pays Interest| P
```

***

## Interest Calculation

Interest accrues continuously based on:

```
Hourly Interest = Position Size × Hourly Rate
```

### Example

| Parameter     | Value      |
| ------------- | ---------- |
| Position Size | 1,000 USDC |
| Hourly Rate   | 0.001%     |
| Duration      | 48 hours   |

**Calculation:**

```
Hourly Interest = 1,000 × 0.00001 = 0.01 USDC
Total Interest = 0.01 × 48 = 0.48 USDC
```

***

## Interest Rates

### Current Rates

Interest rates vary by trading pair:

| Pair     | Hourly Rate | Daily Rate | APR    |
| -------- | ----------- | ---------- | ------ |
| BTC/USDC | 0.001%      | 0.024%     | 8.76%  |
| ETH/USDC | 0.001%      | 0.024%     | 8.76%  |
| SOL/USDC | 0.0015%     | 0.036%     | 13.14% |
| ARB/USDC | 0.002%      | 0.048%     | 17.52% |
| OP/USDC  | 0.002%      | 0.048%     | 17.52% |

### Rate Factors

Interest rates are influenced by:

<CardGroup cols={2}>
  <Card title="Utilization" icon="gauge-high">
    Higher utilization (more matched funds) can lead to higher rates.
  </Card>

  <Card title="Asset Volatility" icon="bolt">
    More volatile assets typically have higher rates to compensate for risk.
  </Card>

  <Card title="Market Demand" icon="arrow-trend-up">
    High trading demand may push rates up.
  </Card>

  <Card title="Governance" icon="users">
    Protocol governance can adjust base rates.
  </Card>
</CardGroup>

***

## APR vs. Actual Returns

<Warning>
  APR is the interest rate only. Your actual returns depend on P\&L from matched
  positions.
</Warning>

### APR (Interest Only)

Annual Percentage Rate assumes 100% utilization for a full year:

```
APR = Hourly Rate × 24 × 365
```

### Total Return

Your actual return includes both interest AND P\&L:

```
Total Return = Interest Earned + P&L from Positions
```

### Scenarios

| Scenario           | Interest | P\&L | Total Return |
| ------------------ | -------- | ---- | ------------ |
| Trader loses 10%   | +2% APR  | +10% | +12%         |
| Trader breaks even | +2% APR  | 0%   | +2%          |
| Trader gains 10%   | +2% APR  | -10% | -8%          |

***

## When Interest is Paid

### Accrual

Interest accrues **continuously** while a position is open:

* Calculated per hour (or fraction thereof)
* Tracked in real-time on the platform
* Visible in your Match dashboard

### Settlement

Interest is **paid** when the position closes:

* Added to your returned funds
* Included in final settlement calculation
* Shows in Match History

***

## Interest Distribution

Interest flows from traders to matchers through the protocol:

| Recipient | Share | Notes                              |
| --------- | ----- | ---------------------------------- |
| Matcher   | 70%   | Portion paid to liquidity provider |
| Protocol  | 30%   | Protocol fee                       |

Interest payments are split between matchers and the protocol.

***

## Maximizing Interest Income

<AccordionGroup>
  <Accordion title="Maintain high utilization">
    Match trades consistently to keep your funds deployed. Unmatched funds earn
    0%.
  </Accordion>

  <Accordion title="Match longer-duration trades">
    Trades held longer accrue more interest. Scalpers close quickly, swing
    traders hold longer.
  </Accordion>

  <Accordion title="Consider higher-APR pairs">
    Volatile pairs (SOL, ARB) have higher rates. Balance against increased P\&L
    risk.
  </Accordion>

  <Accordion title="Compound earnings">
    As interest and P\&L accumulate, they can be matched for additional returns.
  </Accordion>
</AccordionGroup>

***

## Interest Calculator

Estimate your potential interest earnings:

**Inputs:**

* Matched Amount: 1,000 USDC
* Pair: BTC/USDC
* Hourly Rate: 0.001%
* Expected Duration: 72 hours

**Calculation:**

```
Interest = 1,000 × 0.00001 × 72 = 0.72 USDC
Daily Equivalent = 0.72 / 3 = 0.24 USDC/day
Monthly Projection = 0.24 × 30 = 7.20 USDC
Annual Projection = 0.24 × 365 = 87.60 USDC (8.76% APR)
```

***

## Interest vs. Trading Fees

Don't confuse interest with trading fees:

| Type            | Paid By | Paid To             | When                    |
| --------------- | ------- | ------------------- | ----------------------- |
| **Interest**    | Trader  | Matcher             | Continuously while open |
| **Opening Fee** | Trader  | Protocol + Matchers | On position open        |
| **Closing Fee** | Trader  | Protocol + Matchers | On position close       |

Interest is your primary income source as a matcher, while trading fees are split between protocol and matchers.

***

## Viewing Your Interest

### Real-Time

On the Match page:

* **Accrued Interest**: Total interest earned across all active matches
* **Per Position**: Interest earned on each matched trade

### Historical

In Match History:

* Interest earned per closed position
* Total interest over custom date ranges
* Exportable for record-keeping

***

## Tax Implications

<Note>
  Interest income may be taxable in your jurisdiction. Consult a tax
  professional for advice specific to your situation.
</Note>

Keep records of:

* Interest earned per position
* Dates interest was accrued
* Total annual interest income

Export data from Match History for tax reporting.

***

## FAQs

<AccordionGroup>
  <Accordion title="Do I earn interest on unmatched funds?">
    No. Only funds actively matched with trades earn interest. Unmatched funds
    sit idle.
  </Accordion>

  <Accordion title="What if a trade is liquidated?">
    You still earn all accrued interest up to the liquidation. The liquidation
    may also be profitable if it happens in your favor.
  </Accordion>

  <Accordion title="Can interest rates change mid-trade?">
    Rates are fixed at the time of matching. Rate changes apply to new matches
    only.
  </Accordion>

  <Accordion title="Is there compound interest?">
    Interest is simple, not compound. However, you can reinvest earnings
    manually to achieve compounding.
  </Accordion>
</AccordionGroup>

***

## Next Steps

<CardGroup cols={2}>
  <Card title="Matching Overview" icon="handshake" href="/lending/overview">
    Review matching fundamentals.
  </Card>

  <Card title="Fee Structure" icon="receipt" href="/trading/fees">
    Understand all platform fees.
  </Card>
</CardGroup>