There are a number of interest rates used to determine the interest paid on borrowings and interest received on deposits. There are also interest indexes which are used to track the accrued interest.
Borrow interests rates
To differentiate the variable parameters from the stable ones, we are going to use the subscript sā for stable and vā for variable.
The variable borrow interest rate ivbtāā and stable borrow interest rates isbtāā are calculated based on the optimal utilisation ratio Uoptā and optimal stable to total debt ratio 0ratioāā set by the protocol.
If Utā<UOptā
ivbtāā=Rv0ā+UOptāUtāāāRv1ā If Utāā©¾Uoptā
ivbtāā=Rv0ā+Rv1ā+1āUoptāUtāāUoptāāāRv2ā If Utāā©½Uoptā
isbtāā=(Rv1ā+Rs0ā)+UOptāUtāāāRs1ā If Utā>Uoptā
isbtāā=(Rv1ā+Rs0ā)+Rs1ā+1āUOptāUtāāUOptāāāRs2ā If Ratio>0ratioā, an excess is added to the stable borrow interest rate:
isbtāā+=Rs3āā1ā0ratioāratioā0ratioāā The overall borrow interest rate ibtāā factors in all variable and stable rate borrows and is calculated by taking the weighted average of the total variable and stable borrowed amounts and their respective interest rates.
ibtāā=TotalDebtTotalVariableBorrowAmountāivbtāā+āBiāāisbiāāā Where:
ivbtāāis the variable borrow amount,
Biā is the stable borrow amount,
isbiāāis the stable borrow rate,
the subscript i represents each stable borrow taken on the protocol.
Deposit interests rates
The deposit interest rate idtāā is directly dependent on the overall borrow interest rate ibtāā. The borrow interest is divided between the depositors, excluding what is retained by the protocol.
idtāā=Utāāibtāāā(1āRR) Where:
RR is the retention rate i.e. the interest kept by the protocol as revenue.