What are the Interest Rates and how are they determined?

Interest rates for tokens vary and adjust based on current conditions. Borrowing rates depend on the utilization rate, which is the ratio of borrowed assets to total available assets. In a P2P protocol, borrowed tokens come from lenders, so if all tokens are borrowed, lenders cannot withdraw their tokens.

Markets aim for an optimal utilization rate of about 80%. If the rate is below this, borrowing rates decrease to attract borrowers and increase returns for lenders. If it exceeds this rate, borrowing rates rise to discourage new loans and promote repayment, allowing lenders to access their tokens.

The interest model consists of two linear functions that meet at the optimal utilization rate. Parameters like slopes and base rates can be customized. Metal X Lending offers Variable Loans with rates that fluctuate based on the utilization rate, but all borrowers in the same market pay the same rates.

Variable Borrow Interest Rate Parameters