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Interest rate model
Interest rates fall into two categories: Borrower Rates and Supplier Rates. Supplier Rates are the annualized rates paid to Suppliers, while Borrower Rates are the annualized rates paid by Borrowers. Borrowers’ interest will be distributed to the Suppliers and the DAO fund operated by Omm Token holders. Interest rates are determined as a function of Utilization Rate and can be expressed in the below formulae:
Parameters examples
Asset
Uoptimal
R0
Rslope1
Rslope2
ICX
0.8
0
0.08
4
USDS
0.8
0.02
0.06
2
IUSDC
0.8
0.02
0.06
2
As expressed in the above formulae, both interest rates rise in tandem with utilization. This helps prevent a bank run situation because, as utilization increases, Borrowers become more incentivized to pay off their debt (rising interest rates on debt) and Suppliers become more incentivized to deposit more assets (rising interest rates on deposits).
Both paying off debt and supplying additional assets will increase the liquidity of the Omm protocol. In addition, the Utilization Rates of all money markets will be capped at 90% during the initial launch, in which suppliers can still redeem, but borrowers can’t borrow anymore, further preventing a bank run situation.
Last modified 2mo ago
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