LotusUSD

In USD‑denominated Lotus markets, the loan asset is LotusUSD (see Glossary).

LotusUSD is a vault token backed by USDC and tokenized money market funds. Its goal is to earn a rate that is close to the risk-free rate on deployed assets while maintaining onchain liquidity.

Productive debt

Because LotusUSD is yield-bearing, LotusUSD markets have productive debt (see Glossary).

In a LotusUSD market, your effective borrow rate has two parts:

• Base rate: the yield earned by LotusUSD.

• Credit spread: the additional rate set by the Lotus market for the tranche’s risk.

The relationship is: $BorrowRate = BaseRate + CreditSpread$

The effective supply rate incorporates utilization because lenders only earn the credit spread on the portion of their supply that is actually borrowed:

$SupplyRate = BaseRate + (CreditSpread \times UtilizationRate)$

When utilization is 100%, the supply rate equals the borrow rate. When utilization is lower, the supply rate is proportionally lower, but never below the base rate, because idle funds still earn the LotusUSD yield. See Productive Debt Math for the full derivation.

Productive debt means lenders earn a baseline yield even when utilization is low, because idle funds still earn the LotusUSD base yield.

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Why LotusUSD exists

Productive debt provides three practical benefits:

• Lenders earn a baseline yield even when utilization is low. Some return comes from LotusUSD's base yield, not only from borrower demand.

• Idle liquidity stays productive instead of sitting as zero-yield reserves.

• Rates are more stable. Part of the return comes from the base rate, so utilization swings affect only the credit spread component.

For exact definitions and worked examples, see Productive debt math (advanced).

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Mint and redeem LotusUSD

• Mint: deposit USDC to receive LotusUSD shares.

• Redeem: return LotusUSD shares to receive USDC.

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How LotusUSD shows up in Lotus interactions

Most users do not need to handle LotusUSD directly. The app bundles LotusUSD conversions into the same transaction as the market action.

Lending with LotusUSD

When a lender supplies to a LotusUSD market, the deposit is USDC and the system routes it through LotusUSD.

Supply

1. USDC is deposited into LotusUSD to mint LotusUSD shares.

2. LotusUSD shares are supplied to the selected market tranche.

Withdraw

1. LotusUSD shares are withdrawn from the market tranche.

2. LotusUSD shares are redeemed for USDC.

Borrowing with LotusUSD

When a borrower takes a loan from a LotusUSD market, the received asset is USDC even though the market's loan asset is LotusUSD.

Borrow

1. The borrower deposits collateral into the selected market tranche.

2. LotusUSD shares are borrowed from the tranche.

3. LotusUSD shares are redeemed for USDC.

Repay

1. USDC is deposited into LotusUSD to mint LotusUSD shares.

2. LotusUSD shares are repaid to the market tranche.

3. The borrower withdraws collateral (if the position is fully repaid and healthy).

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FAQ

Do I need to hold LotusUSD to use LotusUSD markets?

No. The app routes USDC ↔ LotusUSD conversions for you as part of each action.

Why are rates more stable in LotusUSD markets?

Part of the borrow rate comes from LotusUSD’s base yield (productive debt), so utilization changes affect only the credit spread component.

Can I mint/redeem LotusUSD directly?

Yes, outside of market interactions you can mint/redeem to move between USDC and LotusUSD.

See Also

• Learn → Productive Debt Math for the full derivation

• Learn → Utilization and Rates for how rates are determined

• Reference → Glossary for term definitions