# Utilization Rate

The more the liquidity in the lending/borrowing pool is utilized, the higher the interest rate.

### Two Tick Utilization Curve

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:

$r(t) = \begin{cases}
r_0+ \frac{U(t)}{U_1} (r_1-r_0), & U(t) \leq U_1 \\
r_0 + r_1 + (U(t)-U_1) \frac{r_2}{U_2-U_1}, & U(t) \in (U_1,U_2].\\
r_0 + r_1 + r_2 + (U(t) - U_2) \frac{r_3}{1-U_2}, & (U(t) > U_2
\end{cases}$

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

r_0 | r_1 | r_2 | r_3 | U_1 | U_2 |
---|---|---|---|---|---|

0 | 15 | 25 | 60 | 50 | 80 |

### Extra Rates

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 dLP Lockers.

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