Interest Rates
What Are Interest Rates?
Interest rates represent the cost of borrowing assets or the yield earned by lenders who supply liquidity. Rates are typically variable and adjust dynamically based on market conditions, primarily driven by Utilization (the percentage of funds in the pool that have been borrowed).
How Are Interest Rates Determined?
Utilization-Based Model
When Utilization is low, borrowing demand is weak → interest rates are lower.
When Utilization is high, borrowing demand is strong → interest rates increase to encourage repayment and attract more deposits.
Borrower Interest Rate
This is the rate borrowers pay on borrowed assets.
The rate adjusts dynamically depending on the pool’s Utilization level.
Lender (Deposit) Interest Rate
This is the yield lenders earn by supplying assets.
It is derived from the borrowing interest rate, after accounting for the exchange/protocol’s fee (if applicable).
Why Do Interest Rates Change?
Market Supply & Demand: More borrowing increases rates, while higher deposits reduce rates.
Liquidity Conditions: High utilization raises rates to incentivize lenders to supply more liquidity.
Platform Risk Management: Dynamic adjustments help maintain balance and protect against liquidity shortages.
How can I view the current lending rates?
Click “Lend” to enter the Lending page.
Open the token selection dropdown menu.
You will then be able to view the real-time borrow and lend rates for different tokens.
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