# Earn & Borrow

Overview

Horizon Earn Vaults are the primary entry point for all lending capital within the protocol. They allow users to deposit supported assets into isolated lending markets and earn real yield generated directly from borrower interest. The system is built on Morpho’s peer-to-peer lending infrastructure, enabling optimized rate matching, improved capital efficiency, and real yield accrual. For each deposited asset, the protocol issues a corresponding yield-bearing ERC-20 token (“hToken”) that represents a proportional claim on the underlying vault liquidity. ***

Vault Architecture

Each Earn Vault corresponds to a single deposit asset and supports a set of collateral and borrow markets operating within loan to value limits. New vaults may be introduced subject to risk evaluation. #### Supported Vaults and Markets *The following markets are provided for **illustrative** purposes only.* |


Vault (Deposit Asset)

| Target Markets (Collateral / Loan Asset) | Loan to Value | | -------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | | Ethereum Vault (hWETH) |

WSTETH / WETH
USDx / WETH
WBTC / WETH

|

90%
90%
90%

| | USDC Vault (hUSDC) |

WBTC / USDC
WETH / USDC
TitanX / USDC
DragonX / USDC
ORX / USDC
Auryn / USDC
Horizon / USDC
Blaze / USDC
Inferno / USDC
NOVA / USDC
ASCEND / USDC

|

90%
90%
80%
80%
70%
70%
90%
40%
40%
40%
40%

| | USDT Vault (hUSDT) |

WBTC / USDT
WETH / USDT
TitanX / USDT
DragonX / USDT
ORX/ USDT
Auryn / USDT
Horizon / USDT
Blaze / USDT
Inferno / USDT
NOVA / USDT
ASCEND / USDT

|

90%
90%
80%
80%
70%
70%
90%
40%
40%
40%
40%

| | USDx Vault (hUSDx) |

WBTC / USDx
WETH / USDx
TitanX / USDx
DragonX / USDx
ORX / USDx
Auryn / USDx
Horizon / USDx
Blaze / USDx
Inferno / USDx
NOVA / USDx
ASCEND / USDx

|

90%
90%
80%
80%
70%
70%
70%
40%
40%
40%
40%

| ***

Deposit Lifecycle

#### Asset Supply When a user deposits an asset (e.g. USDx) into its corresponding Earn Vault, the asset is supplied to the lending market and becomes available for borrowing under the defined risk parameters. The depositor is considered a lender within the system. *** #### hToken Minting Upon deposit, the protocol mints a non-rebasing ERC-20 token (“hToken”) to the depositor (e.g. hUSDx). * hTokens represent a proportional claim on the vault’s total assets. * hTokens do not increase in balance. * Instead, each hToken appreciates in value over time as interest accrues. This design enables full composability across DeFi while maintaining precise accounting of accrued yield. *** #### Yield Generation Yield is generated exclusively from borrower interest and is optimized through Morpho’s P2P matching engine: * Liquidity is first matched directly with borrowers at the best available rate. * Unmatched liquidity is routed to fallback pools to continue earning yield. * Interest accrues continuously and is reflected in the increasing exchange rate between hTokens and the underlying asset. Horizon applies a global 20% performance fee on borrower interest. The protocol does not charge deposit or withdrawal fees. All performance fees are routed to the universal buy & burn. *** #### Withdrawal Mechanics Users may redeem hTokens for the underlying asset plus accrued interest at any time. Withdrawals are subject to: * Available vault liquidity * Current market utilization During periods of high utilization, withdrawals may be temporarily limited due to active borrowing within the market. ***

Design Principles

#### Non-Rebasing Yield Tokens hTokens accrue value via an increasing exchange rate, avoiding balance rebasing and ensuring compatibility with external protocols. #### Peer-to-Peer Optimization Morpho’s matching engine improves rates for both lenders and borrowers by reducing reliance on pooled liquidity where possible. #### Capital Efficiency All supplied capital remains productive, whether matched peer-to-peer or deployed in fallback pools. #### Real Yield No inflationary emissions are required for base yield generation. All interest originates from borrower demand. #### Full Composability hTokens are standard ERC-20 assets and may be used in other DeFi protocols as collateral, liquidity, or yield-bearing primitives. ***

Incentives & Emissions

In addition to borrower interest, eligible hToken holders may receive rewards from the NOVA Emission Pool, subject to vault-specific weight parameters. These incentives are designed to: * Encourage long-term liquidity provision * Support early market formation * Complement, not replace, real yield ***

Summary

Horizon Earn Vaults provide a predictable, capital-efficient lending layer built on Morpho’s infrastructure, offering: * Real yield from borrower interest * Non-rebasing, composable yield tokens * Optimized peer-to-peer rates * Integrated buy & burn value capture * Optional protocol incentives via NOVA This architecture aligns lenders, borrowers, and the Horizon ecosystem around sustainable, usage-driven growth. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://trader-li.gitbook.io/horizon-protocol/earn-and-borrow.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.