Folks Finance
xChain App (NEW)Algorand AppContact usV1 Docs
  • Welcome to Folks Finance
  • Folks Finance Algorand app documentation
  • Introduction
    • Get started
      • Create a wallet
      • Get ALGO or ASAs
      • Connect wallet to Folks Finance
    • V2, what's new?
    • Need help?
      • Contact
      • Glossary
      • FAQ
      • Fees
      • Allowing pop-up
    • V2 Testnet tips
  • Functionalities
    • 🏦Deposit
    • 💰Loan
      • Collateral
      • Borrow
    • 🔄Swap and...
    • 🏛️xALGO - Liquid Staking
      • How to Migrate from gALGO to xALGO
    • 🚜Lending Pools
    • 📈Ultraswap
    • 🛣️Folks Router
    • 🔗Algorand Consensus
      • No code
      • SDK
  • Architecture
    • Parameters
    • Pool dynamics
    • Interest rate model
    • Rebalancing
    • Loan collateral
    • Loan borrow
    • Liquidation
    • Loan types
    • Flash loan
  • TOKENOMICS
    • FOLKS
  • DEVELOPER
    • Security
      • Bug bounty
      • Audits
    • Contracts
    • Official SDKs
  • COMMUNITY
    • Contact
    • Work with us
    • Ambassador program
    • Brand & Logos
    • Community treasury
    • Aeneas liquidity program
    • Privacy and T&C
Powered by GitBook
On this page
  • Utilization ratio
  • Stable to total debt ratio
  1. Architecture

Pool dynamics

A pool is a smart contract that collects users’ deposits and facilitates users’ borrowings for a given asset.

Utilization ratio

Each asset available on Folks Finance has a specific liquidity pool where users can deposit and borrow the asset contained.

The pool's Utilisation Ratio UUU, is defined as the ratio between the total debt and the total liquidity:

U=TotalDebtTotalDepositsU= \dfrac{TotalDebt}{TotalDeposits}U=TotalDepositsTotalDebt​

Where:

TotalDebt=TotalVariableBorrowAmount+TotalStableBorrowAmountTotal Debt=Total Variable Borrow Amount+Total Stable Borrow AmountTotalDebt=TotalVariableBorrowAmount+TotalStableBorrowAmount

The protocol leverages UUUto maintain the pool balance among all deposits and borrows. Generally, if UUUcarries a high value, the protocol will exhibit a low borrowing capacity, as well as a low redeem capacity. Therefore, the borrow interest rate, and consequently, the deposit interest rate both increase to disincentivize new loans and incentivize new deposits. So, when UUUtends to 1, the available capital becomes scarce, resulting in a possible problematic situation of unavailable funds for depositor’s withdrawal requests.

On the contrary, if UUUmoves lower, the protocol, on that specific pool, will offer lower returns on deposited capital, so it must incentivize new loans. Therefore, the borrow interest rate and consequently the deposit interest rate will both decrease to incentivize new borrows and disincentivize further deposits.

Stable to total debt ratio

To maintain a healthy ratio of stable borrows to total borrows, the protocol introduces a new variable RatioRatioRatio​ to monitor the weight of the stable borrows compared to the TotalDebtTotalDebtTotalDebt​ .

ratio=SBATotalDebtratio= \frac{SBA}{TotalDebt}ratio=TotalDebtSBA​

When RatioRatioRatio​ carries a high value, the protocol will charge an excess borrow interest rate for new stable borrows to disincentivize them.

Last updated 1 year ago