# Supply

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Supplying tokens to the XOXNO Protocol allows users to **earn interest** on their digital assets while also using these tokens as collateral for borrowing.&#x20;

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**How It Works**

* **Liquidity Pools:**
  * Supplied tokens are added to the XOXNO **liquidity pool**, a smart contract system that facilitates overcollateralized borrowing.
  * Interest is earned automatically, with the **balance growing over time** based on the current market supply rate.
* **Dynamic Interest Rates:**
  * Interest rates for suppliers are determined by the **borrow utilisation rate**, which measures the percentage of total pool assets currently borrowed.
  * As more assets are borrowed:
    * **Utilisation rate increases**.
    * **Interest rates for suppliers rise**, incentivizing more token supply.

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**Key Features**

* **Real-Time Adjustments:**
  * Interest rates and utilisation rates adjust dynamically as users **supply, borrow, repay, or withdraw tokens**.
  * This ensures the system remains responsive to market activity.
* **Passive Income:**
  * By supplying tokens, users can passively **grow their balance** without needing active management.
  * The system operates in a flexible and dynamic liquidity ecosystem.

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**Benefits for Users**

* **Earn Competitive Yields:** Suppliers receive interest based on real-time market conditions.
* **Flexible Collateral Use:** Supplied tokens can double as collateral for borrowing within the protocol.


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