Bank and hTokens Info

H2O Finance Bank

H2O Finance's leveraged yield farming and margin trading are based on the lending and borrowing functions of H2O Finance Bank. Relying on the lending and lending system and leverage function, the Bank, leveraged yield farming and margin trading together constitute the entire ecology of H2O Finance, continuously improving the the funds utilization.

At present, a total of 15 kinds assets are supported by H2O Finance Bank to deposit and obtain interest, including BNB, BUSD, USDT, BTCB and ETH, etc.

Depositors (Lender) can get 2 kinds of gains, namely:

• Interest income generated from the borrowing interest payment from the borrowers (automatic reinvestment)

• H2O reward allocated to hTokens staked in the H2O reward pool

Borrowers (Farmer & Trader) can farm or trade on margin with lower cost and more funds from H2O Finance Bank, while paying a certain amount of borrowing interest to H2O Finance Bank.

What are hTokens?

• When a user supplies their assets to H2O Finance's lending pools, hTokens (interest-bearing Tokens) are used to keep track of the funds they have deposited as well as any interest earned.

• Each time a user supplies funds to the lending pool, they are issued a corresponding balance in hTokens. This balance of the hTokens is directly proportional to the stake they have in the lending pool, which accrues interest every block.

• Each lending pool has its own hToken, for example, if a user lends BNB to the protocol, they will receive a corresponding balance of hBNB.

How do hTokens earn interest?

• Each deposit vault earns interest. However, the interest isn't distributed. Instead, simply by holding hTokens, you'll earn the interest.

• hTokens accumulate interest through their exchange rate; over time, each hToken's value increases, becoming convertible into a larger amount of its underlying asset with every block, even while the number of hTokens in your wallet stays the same.

• Each deposit pool has its own utilization which will also reflect how much the corresponding hTokens will appreciate over time.

• The longer a user holds hTokens, the higher the value of those tokens appreciates. This is the accumulation of interest.

• You do not need to stake hTokens to enjoy this price appreciation, although you will still earn it while your tokens are staked.

‌Do I need to calculate the hTokens exchange rate?

When H2O Finance was launched, the hToken exchange ratio (ie. how many BNB one hBNB was worth) began at 1:1. Since the launch of leveraged yield farming though, it has continued to increase at a rate equal to the compounding market interest rate. This represents the accrual of the lending fees to lenders' tokens.

For instance, if the lending APY for a year was an average of 50%, the value of the hToken at the end of the year would be ~1.5.

Each user has the same hToken exchange rate; there’s nothing unique to your wallet that you have to worry about.

‌Example

Let's say you deposit 1,000 BNB in our vault when each hBNB is worth 1.05 BNB, you would receive 952.38 hBNB (1,000 / 1.05)

A few months later, you decide it’s time to withdraw your hBNB from the vault, when the exchange rate is 1.10. The following will occur:‌

• Your 952.38 hBNB is now equal to 1,047.618 BNB (952.38 * 1.10)

• You could withdraw 1,047.618 BNB, which would exchange all 952.38 hBNB

• Or, you could withdraw a portion, such as your original 1,000 BNB, which would redeem 909.09 hBNB (keeping 43.29 hBNB in your wallet)