# Vanilla Markets

## Overview

Vanilla Markets sit alongside the feUSD CDP market as another lending option. It is built on **Morpho’s lending stack** and pair borrows and lenders.

| Side          | Role                                                                                                                  | What they supply               | What they earn / pay                                 |
| ------------- | --------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ---------------------------------------------------- |
| **Borrowers** | Deposit collateral to borrow an asset (e.g., HUSD, HYPE, USDC). Debt accrues at a **dynamic variable rate**.          | Collateral (HYPE, UBTC, ETH …) | Pay a floating borrow APY determined by utilisation. |
| **Lenders**   | Supply idle assets (HYPE, USDC,‑etc.) to earn yield. Funds are matched P2P first; excess sits in the underlying pool. | Assets they wish to earn on    | Earn the borrow APY minus a small protocol spread.   |

Unlike the CDP, **there are no redemptions or borrower‑set fixed rates**—all pricing follows a utilisation curve.

### Why Use Vanilla Markets?

1. **Asset‑native borrowing** — obtain HYPE, USDC, or other supported tokens directly, avoiding the need to mint feUSD and swap.
2. **No redemption risk** — positions are immune to the feUSD peg mechanics.

#### Trade‑offs vs. the feUSD CDP

* **Higher effective borrow cost** on average (floating APR vs. self‑selected fixed rate).
* **Lower LTV** (75–80 % typical) because the Stability Pool backstop is absent.
* **Interest‑rate volatility** — costs can spike in a liquidity crunch.