Savings under the hood
So where is the interest coming from? It is the result of your funds facilitating crypto market activities. You authorize your funds to be used for lending and receive a certain interest for it. The lenders can be various market participants: platforms and projects that need funds to help clients access alternative liquidity, for institutional market-making, and more.
A cryptocurrency savings account is similar to a traditional bank savings account. When you put your funds into a savings account in a bank, you give your bank permission to use your money, for example, to lend them to some third parties. For that, the bank returns you some interest. A crypto savings account works in the same way. You receive interest for borrowing your funds.
Now let’s move to one of the most important questions: how the interest rate or annual percentage yield (APY) is calculated.
The APY is calculated like this: the average daily interest rate from the past 7 days multiplied by 365.
For Locked savings, the APY is fixed. This means that the percentage of the interest rate will remain the same within the lending period.
For Flexible Savings, the interest rates are fixed for one day. After, the APY is floating and based on supply and demand. For example, when there are plenty of borrowers but there aren’t many people willing to lend crypto assets, the interest rates will be high. And the other way round — if supply exceeds demand — the interest rate will be lower.
For ease of calculation, you will be able to see the Flexible APY on the Savings dashboard.