Interest

When users borrow, they must pay interest on the borrowed amounts. The interest rates for these loans are calculated based on the utilization rate of the underlying assets, a base rate, and a multiplier. The formula for determining the borrowing rate is as follows:

The base rate is fixed at 2%, and the default multiplier rate is 22.5%. However, the multiplier can be modified through governance decisions.

Conversely, when users provide assets, they earn interest. The supply interest rates are calculated from the borrowing rate, the reserve factor, and the total borrowed amount. The formula for determining the supply rate is as follows:

The reserve factor indicates the portion of the interest paid by borrowers that is allocated to reserves. This reserve serves governance purposes or acts as insurance against borrower defaults, thus protecting all suppliers.

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