# Core Concepts
1. **Pairs and Lending Mechanics**
In each isolated market, users can borrow one type of token (Asset Token) by depositing another (Collateral Token). Depositing Asset Tokens in a pair gives lenders a Receipt Token claim that is redeemable for an increasing quantity of Asset Tokens as interest accrues. Borrowers deposit Collateral Tokens to gain the right to borrow Asset Tokens.
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2. **Interest Rate Mechanics**
Interest is accrued continuously according to the formula: Pe^rt-e. Interest rates are determined by a specific Rate Calculator contract for each pair. The Time-Weighted Variable Rate adjusts based on asset utilization—rates decrease if utilization is low and increase if high.
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3. **Loan-To-Value (LTV)**
LTV represents the ratio of borrowed assets to deposited collateral. It changes with market rates and interest accrual. Borrowers must maintain their LTV below a pre-set Maximum LTV to avoid their position being elligibile for liquidation. To correct an unhealthy LTV, borrowers can add collateral or repay part of the loan. The Maximum LTV is set for each individual asset pair.
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4. **Vault Account Mechanics**
The Vault Account is a key element in the pair's accounting system, comprising two main components: the Account Value (total tokens within the vault) and a unique representation of ownership for each lender.
* Account Value: Reflects the total holdings in the vault, including both the initial deposits and any accrued interest.
* Lenders: Receive an increased value, symbolizing their contribution to the Vault Account, which can be redeemed later in proportion to their share of the total Account Value.
As interest accrues within the pair, the Account Value increases, enhancing the redeemable value of each lender's token.
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