Supplying Assets & pTokens

When you deposit into a Peridot market you receive pTokens — a receipt for your share of the pool. You don't earn interest as separate payouts; instead, the receipt itself becomes redeemable for more and more of the underlying asset. This page explains that mechanism, because everything else (APY, withdrawals, collateral) builds on it.

The exchange rate#

Each market tracks one number that ties pTokens to the underlying asset: the exchange rate. On deposit you get amount / exchangeRate pTokens; on withdrawal each pToken pays out at the current rate:

underlying = pTokens × exchangeRate

exchangeRate = (cash + totalBorrows − reserves) / totalPTokenSupply

As borrowers pay interest into the pool, totalBorrows grows, so the exchange rate — and with it the value of every pToken — only ever moves up. Your pToken count stays constant while you hold; your claim on the pool grows underneath it.

A worked example#

• You deposit 1,000 USDC when the exchange rate is 1.0200 → you receive ~980.39 pUSDC.
• Over the year, borrower interest lifts the exchange rate to 1.0710.
• Your 980.39 pUSDC now redeem for 980.39 × 1.0710 ≈ 1,050 USDC — a 5% yield, delivered entirely through the rate.

Why a receipt token at all?#

• Continuous interest — accrual happens every block, with no payout schedule and nothing to claim or reinvest.
• Instant, partial withdrawals — redeem any fraction of your pTokens at any time, as long as the pool has liquidity.
• Collateral — the same pTokens double as collateral when you borrow, without interrupting the interest they earn.

Read next#