Inverse Finance

Search…

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 appliedCalculating 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

Last modified 3mo ago

Copy link

Outline

Calculating Interest Rates

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

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

Visualization