New Interest Rate Model

Sep 14, 2021 10:00:00 AM / by DeFiner

Interest Rate Calculation 

Definitions: 

  • u is the capital utilization rate of a certain token
  • Compound Supply Rate: the real-time supply rate on the money market
  • Compound Borrow Rate: the real-time borrow rate on the money market
  • Compound Supply Rate Weight: the weight parameter of the Compound Supply Rate
  • Compound Borrow Rate Weight: the weight parameter of the Compound Borrow Rate
  • Compound Supply Ratio: the percentage of capital deployed on money market

Borrow Rate Model: 

When u >0.999,

Rate Curve Constant\div(1-u) = Rate Curve Constant \div(1-0.999)= RateCurveConstant\times1000

For assets that are not available on Compound or other money markets, Compound Supply Rate Weights=0, Compound Borrow Rate Weights=0,

In summary, there are two factors that decided the Borrow APR, the prevailing market rate that is available in the market and the capital utilization rate in the DeFiner protocol. Also, it's a non-linear model. The borrowing interest can adapt quickly if the utilization of the pool approaches a relatively high level.

Based on different parameter sets, we have three different strategies: Conservative Mode, Moderate Model, and Aggressive Model.

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Deposit Rate Model: 

For assets that are not available on Compound or other money markets, Compound Supply Rate Weights=0, Compound Borrow Rate Weights=0

Interest Accounting System

Definitions: 

  • Deposit Principle: the crypto assets that users deposited
  • Deposit Interest: interest that the depositor earned
  • Deposit Storage Interest: the interest that depositor accrued
  • Deposit Accrual Interest: the deposit interest that has not accrued
  • Deposit Interest Per Block: interest that user earned for every block
  • Blocks Per Year: annual expected blocks of the blockchain

Formular:

Deposit Interest Per Block = (Deposit Principle+Deposit Storage Interest) \times Deposit Interest Rate Per Block

DepositInterest(block_t)=DepositInterest(block_t -_1))+DepositInterestPerBlock

BorrowAPR will be updated in the contract if there were any users who have deposits of the token performs a transaction

The interest earned between the last transaction block of the user and the latest transaction block will be accrued if the user performed a transaction and will be added to the Deposit Storage Interest.

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