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↪ interest rates

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Last updated 4 months ago

Interest Rate Models in Isolated Pools

In HyperLend, each market pair features an interest rate model that adjusts according to the utilization of deposited assets. Utilization reflects the percentage of deposited tokens currently lent out to borrowers.

Linear Time-Weighted Variable Interest Rate

When a new interest rate contract is deployed, the following settings are determined:

  • vertex utilization: The utilization at which the interest rate slope increases

  • vertex rate delta: Determines how far the vertex rate sits between the base rate and the max rate.

  • minimum target utilization: The minimum utilization wherein no adjustment to full utilization and vertex rates occurs

  • maximum target utilization: The maximum utilization wherein no adjustment to full utilization and vertex rates occurs

  • zero utilization interest rate: The interest rate when utilization is 0%

  • minimum full utilization interest rate: The minimum interest rate at 100% utilization

  • maximum full utilization interest rate: The maximum interest rate at 100% utilization

  • interest rate half-life: The half-life for interest rate adjustments

Linear Time-Weighted Variable Interest Rate uses a linear formula to calculate the current interest rate, but changes vertex and max rate based on time.

If utilization is low, the vertex and max rate will slowly decrease over time (if utilization is 0%, it will decrease by 50% per half-life). However, if utilization is high, it will keep increasing until it hits the maximum full utilization interest rate (if utilization is 100%, it will increase by 100% per half-life).