Interest Rate Model
Parameters
The purple line represents the Borrow APR according to Utilization Rate and the blue line represents the Supply APY.
Max/Min Supply APY, Max/Min Borrow APR, Inflection Point (Kink Rate) are five key points in the IR model, which determines variable interval and speed.
Kink Rate seeks to govern the self-protection properties of the IR Model in case of an extreme situation of Utilization Rate; if the UR exceeds the Kink Rate, it will trigger the Supply APY/Borrow APR to significantly increase to encourage supply call-back to borrow.
Inflection Point APY/APR are constants, which is algorithmically determined values that safeguard the model.
Borrow APR Formula (Simple Interest)
0~Kink Rate:
Tips:
If current Utilization Rate < Kink Rate, the Borrow APR and Supply APY will smoothly fluctuate coordinately with the UR, which is a great opportunity for users to supply/borrow.
Kink Rate~100%:
Tips:
If current Utilization Rate > Kink Rate, the Borrow APR and Supply APY will rapidly increase as the utilization increases, which is unprofitable, rendering it unsecure to borrow. Similarly, it becomes very profitable for suppliers with considerable APY returns (50%+).
Borrow APR Formula (Compound Interest)
Tips:
Based on the Dynamic IR Model, Borrow APR varies each time with UR changes, so Compound Borrow APR is decided by Single Borrow APR, which is related to slot speed of Solana.
Supply APY (Compound Interest)
Reserve_owner_fee_rate =0.20 (the commission fee is 20%)
Larix protocol will only charge a commission fee (Reserve Owner Fee) once during the whole supply and borrow process
Supply APY varies with UR which is dynamic by user behaviors
Larix protocol does not charge any operation fee, gas fee is paid for utilizing the Solana chain
Tips：The commission rate does not depend on the number of platform transaction, but only UR.
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