📊Interest Rates

Interest rate for specific market is determined on capital utilization basis. The more capital is utilized (capital deployed as debt) the interest rates will be higher and vice versa. For every specific market there are following configurable market parameters that can be adjusted according to liquidity providers wishes/strategies:

• Target Capital Utilization - Amount of tokens in the lending pool liquidity providers aim to lend. Should the amount lent fall below this designated threshold, the interest rate will deviate lower than the intended target, potentially reaching as low as 0 in scenarios where no capital is being lent. Conversely, surpassing this predefined value results in a rapid and exponential escalation of the interest rate.

• Target Interest Rate - Daily interest rate set for specific Target Capital Utilization

• Min.Daily Interest Rate - Interest rate lower cap (when Capital Utilization is 0%)

• Max.Daily Interest Rate - Interest rate upper cap (when Capital Utilization is 100%)

• Target Available Capital - Amount of capital liquidity providers aim to hold as a reserve (Inversely related to Target Capital Utilization)

$$(1- Target Capital Utilization) = TargetAvailable Capital$$

• Max. Collateralization Ratio - maximum amount of debt value related to collateral value that User can withdraw on specific market (the higher this value is, the more debt can be taken for the same collateral value)

• Liquidation Threshold - once LTV (Loan to Value/ Debt to Collateral) exceed this threshold, liquidation auction will start

Determining Target Interest Rate and Target Utilization will shape markets interest rate dynamics