Borrow Rate Stratergy

All open borrows on Alloc8 pay a lending rate (APR) back to the lending liquidity pool. This APR fee is distributed pro-rata to all lenders. The interest rate model is a plot of the utilization and the borrowing rate.

graph to show relationshiip between utilization and borrow rate.

Model Overview

The lending APR is variable for all open and new loans. The variable rate depends on pool utilization as shown in the curve above. As utilization increases, the borrowing rate increases. As utilization approaches 100% the borrowing rate increases at a faster pace.

Generally, this kind of model has a "Kink" point after which the borrow rate increases at a rapid rate, initially alloc8 plans to keep that at 80% which could change in the future.

Given the current utilization rate of the lending pool, it calculates the borrowing rate and liquidity rate. The interest rate curve has the following parameters:

• Opu: optimum utilization - 80% based on the graph

• BBRate: Base borrow rate- 5% would be the base borrow rate

• Slope 1: applicable to the kink point i.e 80%

• Slope 2: Applicable after the kink point is hit