# How Nook earns Higher Rates

Nook taps into money markets where the rates are set by supply and demand. If demand for your funds (USDC) is high, then the rate of return is high. This is all calculated automatically based on (a) money deposited and (2) money borrowed.

Nook currently connects you to one of five earning markets, from two protocols including AAVE and Morpho, with over $60B in asset deposits between the three.

Rates are not always high however and tend to see decreased returns in slower markets.

**Why do people borrow funds against their existing collateral onchain?**

People borrow funds against their existing assets for different reasons. But people often need access to liquidity for trading or tax benefits - and they’re willing to pay higher rates for that convenience. If the borrower is unable to repay the loan, the protocol automatically liquidates the borrower’s collateral to repay the loan. That’s the beauty of collateralized lending: the system is designed to protect lenders (you) and the borrowers assume the risk.

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