So I have a few thousand XMR I am thinking about lending out on Polo.
I understand the risk is pretty low for a fairly guaranteed return. What rate do you think I should lend out at? I'm still a little confused on how the lending rates work.
i can not tell you what rate to lend out that coins. the rate you set is per 24 hours, but it gets deducted hourly or maybe even lower timeframes (i am not sure!)
so if a shorter gets 1000 coins from you for 0.5%, but after 2 hours he decides it was not such a good idea and returns the coins to you without doing a trade -> you will still get some, but not the 0.5 %
in my opinions its not worth it, but a lending market should develop, so do what you feel is best.
maybe TC can tell us all about it, he seems to know best.. 
They calculate the return quite often actually, I think it is in basis of minutes rather than hour(s). Usually the loan is held by for a few hours to a few days and then it goes automatically to market.
What rate to lend out is based on supply vs. demand: You go to lending, look at lending offers and then find where the majority of coins are and place your order for 0.00001% below the majority. Usually you need to waite some time as someone wants to borrow your coins. The longest I've waited has been like days and the rate being the minimum. Sometimes there is absolutely no interest to short it, not even one shorter, and actually that is the usual case with XMR despite the trendline has been pretty favorable to shorters in the past.
Basically what you can expect to get from lending is dust but at some point Monero dust might be more valuable than its weight in gold.
