# Utilization

### **What Is Utilization?**

**Utilization** refers to the percentage of total available funds in a lending pool that have been borrowed by users. It reflects how much of the pool’s liquidity is currently in use.

**Formula:**

Utilization=Total Borrowed / Total Lent × 100%

For example:

* If a pool has **1,000 USDT deposited** and **800 USDT borrowed**,
* Then **Utilization = 80%**.

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### **Why Is Utilization Important?**

* **For Lenders:**
  * High utilization means more of their funds are actively lent out, potentially earning **higher interest.**
  * Very high utilization, however, may **limit withdrawal flexibility**, as most funds are borrowed.
* **For Borrowers:**
  * High utilization can lead to **higher interest rates**, as demand for liquidity is strong.
  * Low utilization generally means **lower borrowing costs** and easier access to funds.
* **For the Exchange:**
  * Utilization helps balance supply and demand in the lending market.
  * It influences the **dynamic interest rate model** — interest rates often increase when utilization is high, encouraging repayment and new deposits.

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### **Key Parameters**

* **Optimal Utilization:** The point where interest rates begin to increase rapidly to encourage more lending and loan repayments.
* **Throttled Utilization:** The utilization rate threshold where lend redeems and new borrows are paused to prevent 100% utilization.
* **Max Utilization:** The maximum utilization rate threshold where no lend redeems or new borrows are allowed, and positions may be automatically deleveraged.

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### **👉**[**Learn more about** Utilization](https://app.gitbook.com/s/ZRzI8k3y3P5zqjPLRxSx/borrow-and-lend/utilization-and-interest-rates)

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