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Borrow Interest Rate
Regarding the issue of whether to charge loan interest, we have gone through a lot of analysis and evaluation, and also referred to the practices of most decentralized stablecoins in the market. In consideration of the stability and development of the agreement, we made a decision to charge a certain amount of interest. Of course, this interest rate is very low most of the time.
Before understanding the interest rate model, you need to understand the nouns:
- MCR = Minimum Collateral Ratio
- ICR = Individual Collateral Ratio
- TCR = Total Collateral Ratio
- CCR = Critical Collateral Ratio
- OCR = Optimal Collateral Ratio
We hope that the the total system collateral ratio will remain within a reasonable range, because we have introduced OCR, namely Optimal Collateral Ratio. Under normal circumstances, the borrowing rate will remain at a very low level, but once the system's mortgage rate exceeds the OCR, it will increase sharply.
The interest rate
follows the model:
In the borrow rate technical implementation, the calculateCompoundedInterest method relies on an approximation that mostly affects high interest rates. The resulting actual borrow rate can is:
For the attributes of LSDs collateral and based on the above formula, we calculate the following data and set as the parameter: