Paystream’s P2P lending model is designed to eliminate the APY spread typically found in traditional lending markets. In most DeFi protocols, there is a significant gap between what a borrower pays (borrow APY) and what a lender earns (supply APY). This spread is usually captured by the protocol itself. In Paystream, since lenders and borrowers are directly matched through the P2P engine, this spread is effectively removed. As a result:
  • Lenders earn more than they would in the underlying pool.
  • Borrowers pay less than they would in the pool.
  • No value is lost to intermediaries.
This is one of the core benefits of Paystream’s design capital efficiency without protocol-imposed friction.

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P2P Rate Calculation

When a borrower is matched with a lender, the interest rate they pay is determined by the P2P rate, which is derived from the current APYs of the selected optimizer’s underlying protocol. The P2P rate is calculated as a weighted average of the supply and borrow APYs from the underlying pool: 
APYp2p = α × APYborrow + (1 - α) × APYsupply
Where:
  • APYborrow is the borrow rate in the underlying protocol.
  • APYsupply is the supply rate in the underlying protocol.
  • α (alpha) is the weight parameter, typically set to 0.5, making it an even average.
This ensures that:
  • The borrower pays less than they would if borrowing directly from the pool.
  • The lender earns more than they would by lending directly into the pool.

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Example

Suppose in the underlying protocol:
  • Borrow APY = 15%
  • Supply APY = 8%
Then the P2P rate is: 
APYp2p = 0.5 × 15% + 0.5 × 8% = 11.5%
So:
  • The borrower pays 11.5%, which is 3.5% lower than the original 15%.
  • The lender earns 11.5%, which is 3.5% higher than the original 8%.
This structure makes the match beneficial for both sides, increasing returns for lenders while reducing costs for borrowers a true win-win.

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Per-Block Interest Accrual

Interest in Paystream is calculated per block, rather than per second or per epoch. This allows for more accurate and real-time tracking of both borrower debt and lender yield. It also enables granular control over positions, especially useful in dynamic Solana environments where block times are fast and continuous. The per-block model ensures that:
  • Lenders are fairly compensated for the exact amount of time their capital is deployed.
  • Borrowers only pay interest for the actual time they’ve held the funds.

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Average APY for Lenders

Lenders may not always have 100% of their capital matched P2P at all times. A portion of their funds may remain in the underlying protocol while waiting for a match. As such, the yield a lender earns is the weighted average of:
  • The P2P APY (for matched funds), and
  • The fallback supply APY from the underlying protocol (for unmatched funds)
For example:
  • 60% of a lender’s capital is matched P2P at 11.5% APY
  • 40% is earning fallback yield in the pool at 8% APY
Then the lender’s average APY is: 
Avg APY = 0.6 × 11.5% + 0.4 × 8% = 10.1%
This reflects the actual blended return the lender earns across both yield sources, depending on how much of their liquidity is matched at any given moment.

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Full Capital Utilization

Paystream’s P2P matching model allows for 100% capital utilization when a lender is matched. Unlike pool-based systems where idle capital often sits unused, Paystream ensures that every dollar matched P2P is actively generating yield. In Paystream:
  • Matched funds are immediately deployed to borrowers.
  • Unmatched funds earn base yield in the fallback protocol until needed.
  • As soon as borrower demand appears, those funds are redirected for higher-yield P2P use.
This approach optimizes protocol-level capital flow and makes Paystream one of the most efficient ways to deploy or borrow capital on-chain.