Interest Rate Model
To understand how the interest rates in Frontier are determined, we must first understand a few parameters of the interestRateModel: 0x8f0439382359c05ED287Acd5170757B76402D93F
`utilizationRate` – the % of an asset borrowed compared to supplied
`multiplierPerBlock` - The multiplier of utilization rate that gives the slope of the interest rate
`multiplierPerYear` - The multiplierPerBlock * 2,336,000
`jumpMultiplierPerYear` - The multiplierPerBlock after hitting a specified utilization point
`reserveFactorMantissa` - the % of borrow interest that goes to the protocol
`kink` - The utilization % at which the jump multiplier is applied

# Calculating Interest Rates

`Kink` is set to 75%, the DAO can adjust this through an on-chain vote.
`multiplierPerYear` is set to 5.93, the DAO can adjust this through an on-chain vote.
`jumpMultiplierPerYear` is set to 166.67, the DAO can adjust this through an on-chain vote.
`reserveFactorMantissa` is set to 20%, the DAO can adjust this through an on-chain vote.

## If the utilization of an assets is 75% or less then:

The borrow interest rate = utilization rate * multiplierPerYear
Lend interest rate = borrow interest rate * (1 - reserveFactorMantissa) * utilization rate
For example if \$10m of an asset is supplied, and \$6m has been borrowed then:
Borrow interest rate = 60% * 5.93 = 3.56%
Lend interest rate = 3.56% * 0.8 * 0.6 = 1.71%

## If the utilization of an asset is above 75% then:

normalRate = utilization rate * multiplierPerYear
The borrow interest rate = ((utilization rate – kink) * jumpMultiplierPerYear) + normalRate
Lend interest rate = borrow interest rate * (1 - reserveFactorMantissa) * utilization rate
For example if \$10m of an asset is supplied, and \$8.5m has been borrowed then:
normalRate = 85% * 5.93 = 5.04%
Borrow interest rate = ((85% - 75%) * 166.67) + 5.04% = 21.71%
Lend interest rate = 21.71% * 0.8 * 0.85 = 14.76%

# Visualization

For a visualization of our Interest Rate Model, please check out our Transparency page at this link: https://www.inverse.finance/transparency/interest-model