Kashi NMR Lending: Earn APR Without Staking on a Model

4 min readJul 9, 2021

With the creation of NMR contracts on Sushi’s lending platform Kashi, it has become possible to lend out your NMR to other users while earning interest. This can be especially interesting for NMR holders that do not participate in the tournament, or do not want to risk burning their NMR when staking on prediction models.

This article describes the benefits and risks of the Kashi platform from a lender’s perspective and contains instructions on how to get started earning interest rate on your NMR.

As stated, Kashi is a lending platform by SushiSwap, released at the end of March 2021. It is similar to other lending protocols such as Compound or Aave, in that it brings together lenders and borrowers. However, a notable difference with existing protocols is that the lending pools on Kashi are isolated. This means that collateral and risks are not shared amongst the different pools.

This is a considerable difference, since it allows Kashi to let users create their own pools with their own tokens. And although multiple NMR markets were indeed created, this article will focus on the USDC-NMR pair (0x7bee2161afa1aee4466e77bed826a41d5a28db46). This is currently the most popular market; probably because the USDC basically enables data scientists to now participate in the tournament using stablecoins instead of the more volatile token NMR.


In this said pair, you as a lender provide NMR to the pool. Other users are then able to borrow from the pool by providing collateral: USDC. Borrowers pay an elastic interest rate in order to do so, which is determined by the utilisation ratio of the pool. When under 70% (i.e. less than 70% of the provided NMR is utilised), the interest rate drops. If the utilisation rate is above 80%, the interest rate rises.

The change in elastic interest rate (y-axis) is determined by the utilisation rate (x-axis). [source]

This algorithm aims for a utilisation ratio between 70% and 80%, with the idea that falling outside of this range either (1) a diminishing interest rate will cause lenders to remove liquidity or (2) an expanding interest rate will incentivise lenders to provide more liquidity. This interest rate is an APR (annualised percentage rate) and is added to your lending position over time. Say you supply 100NMR at a theoretical constant APR of 20%, and decide to withdraw after 3 months: you’d then be able to withdraw 105NMR.


The main risk to consider as a lender is that the borrower’s USDC collateral might become less valuable than the NMR borrowed out. In theory however, this should never be able to happen. The value of the NMR a borrower is able to take out of the pool cannot exceed 75% of the value of their collateral. However, the value of that NMR might increase over time. Kashi determines this value based on Chainlink’s NMR oracle. During the time which the borrowed position is ≥75% of the collateral, the collateral becomes susceptible to being liquidated. The USDC is then swapped for the amount of NMR it was covering, and is used to resupply the lending side of the pool. Above 77%, the borrower is also charged a 12% liquidation bonus, which is collected by the liquidator. The true risk here as a lender is that the liquidation occurs too late, and that the collateral cannot cover the borrowed NMR position anymore (it could therefore be worth it to become a liquidator yourself, and cover this risk yourself).

Another thing to consider is that as a lender withdrawal is only possible for NMR which is unused. It is for this reason the elastic rate algorithm tries to keep the utilisation rate under 80%; a 100% utilisation rate would basically freeze all supplied liquidity. However with the interest rate doubling every 8 hours, the position is not tenable for borrowers on the long run, and more liquidity is bound to enter the pool (either from outside or by liquidation).


Lastly it is good to note that the transactions needed to provide liquidity and withdraw cost gas. SushiSwap’s BentoBox tries to solve this by basically accepting all deposits for all pools into one single smart contract — reducing transactions between different pools in case you plan on stepping in and out of the pool multiple times. You’d then only pay for gas to deposit into your BentoBox, after which gas fees are practically zero.

Now this is pure speculation, but I believe it is SushiSwap’s intention to broaden the support for BentoBox across their platform. As a lender this could for example mean your NMR could be either deployed into a swap pool or into a lending pool, depending on the demand. Then there’s also BentoBox’s strategy function which is still unused, which would open up even more possibilities to deploy NMR that is not utilised.

All the more reason to keep an eye out for Sushi’s next release: