Interest Rate

When users borrow assets, they are required to pay interest on the borrowed amount. The interest rates for borrowing are determined based on the utility rate of the underlying assets, the base rate, and a multiplier. The formula for calculating the borrowing rate is as follows:

The base rate is set at 2%, and the multiplier rate defaults to 22.5%. However, the multiplier rate can be adjusted through governance.

On the other hand, when users supply assets, they can earn interest. The interest rates for supplying assets are derived from the borrow rate, the reserve factor and the total amount of borrows. The formula for calculating the supply rate is as follows:

The reserve factor represents the percentage of the interest paid by borrowers that is converted into reserves. The reserve can be used by the governance or act as an insurance against borrower default which protects all the suppliers.