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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

$R_t$

follows the model:

$if \hspace{1mm} CCR > TCR: \hspace{1cm} R_t = R_{base}$

$if \hspace{1mm} CCR \leq TCR < OCR: \hspace{1cm} R_t = R_{base} + \frac{TCR - CCR}{OCR - CCR} R_{slope1}$

$if \hspace{1mm} OCR \leq TCR: \hspace{1cm} R_t = R_{base} + R_{slope1} + (\frac{TCR}{OCR}-1)R_{slope2}$

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:

$Actual APY = (1+Theoretical APY/secsperyear)^{secsperyear}-1$

For the attributes of LSDs collateral and based on the above formula, we calculate the following data and set as the parameter:

*OCR *

= 200%

$R_{base}$

= 0.5%

$R_{slope1}$

= 2%

$R_{slope2}$

= 10%Last modified 3mo ago