Utilization Rate
The more the liquidity in the lending/borrowing pool is utilized, the higher the interest rate.
The more the liquidity in the lending/borrowing pool is utilized, the higher the interest rate.
The profitability of Lenders depends on the Utilization Rate U - the higher utilization, the higher the interest rate. All strategies share the same rate.
The interest rate is calculated the following:
The two-tick model introduces three states essentially:
0 - 50% Utilization: cheap to borrow
50 - 80% Utilization: high but acceptable rate for borrowing
80 - 100% Utilization: very expensive to borrow
On top of the regular interest rate described above, the DAO can vote to charge an additional rate for every strategy individually. The additional fees are distributed among the lenders (thus making APYs higher) and the .
