LotusUSD

In USD-denominated Lotus markets, the loan asset is LotusUSD. LotusUSD is a vault-backed token designed to earn a base yield while remaining liquid enough to support normal market operations such as borrowing and withdrawals.

LotusUSD is backed by USDC and tokenized short-term US Treasuries. 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.

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.

You can think of it as: $BorrowRate = BaseRate + CreditSpread$

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 can still earn yield. Unborrowed funds can remain productive instead of sitting as zero-yield reserves.

• Rates are more stable. Because part of the return comes from the base rate, rates tend to move less abruptly as utilization changes.

This page explains the behavior at a conceptual level. If you want exact definitions and worked examples, use the Productive debt math (advanced) section.

Mint and redeem LotusUSD

You can convert between USDC and LotusUSD.

• Mint: deposit USDC to receive LotusUSD shares.

• Redeem: deposit LotusUSD shares to receive USDC.

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 interactions

When you lend to a LotusUSD market, you deposit 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 LotusUSD shares are withdrawn from the market tranche.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 interactions

When you borrow from a LotusUSD market, you receive USDC even though the market’s loan asset is LotusUSD.

Borrow

1. You deposit collateral into the selected market tranche.

2. You borrow LotusUSD shares 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. You withdraw your collateral (if your position is fully repaid and healthy).