Dynamic Interest Rate Model

Yei Finance features dynamic interest rate model in its DeFi lending protocol, adjusting in response to fluctuations in asset supply and demand. This responsive mechanism maintains liquidity balance, with interest rates escalating with increased borrowing demand and diminishing as it wanes.

Components of Interest Rates

• Minimum Rate: The interest rate when asset utilization is at 0%.

• Vertex Rate: The rate at which utilization is equal to the vertex utilization, where the rate curve changes slope.

• Vertex Utilization: The specific utilization percentage at which the shift in rate slope occurs.

• Maximum Rate: The interest rate applied when asset utilization reaches 100%.

Interest Rate Formula

The interest rate calculation depends on the current asset utilization relative to the vertex point: