Interest Rate Model
Last updated
Last updated
The interest rate for each market is determined dynamically, purely based on supply and demand of that market. Interest is calculated and accrued on a per-block basis, with an average of ~1.25s mainnet blocktime and ~0.8s testnet blocktime as of June 2023.
baseRate | criticalRate | criticalPoint | baseSlope | jumpSlope | reserveFactor |
---|---|---|---|---|---|
0.1% | 10.1% | 80% | 0.125 | 3.5 | 10% |
Users will be charged interests for borrowing fungible token assets. The borrow interest rate is algorithmically-set based on supply and demand of the asset - which is reflected by the asset pool utilization rate.
A critical point (80%) exists in the borrow interest rate model:
When utilization rate is below the critical point, a flatter slope is applied
Once utilization rate exceeds the critical point, the slope becomes much steeper - This incentives borrowers to pay back the borrowed assets while at the same also incentives suppliers to deposit assets to earn a high APR.
Supply interest rate is inferred from borrow interest rate after deducting the fraction goes to the pool reserve:
Each asset pool maintains a FungibleToken Vault as pool reserve, whose balance comes from a fraction of generated interests, determined by reserveFactor. Reserve serves the purpose of incentivization and risk mitigation, such as protection against smart contracts exploits, oracle attacks, emergency shutdown, etc.