# Interests

In OrdiLend's lending pools, the interest rates for both supplying and borrowing assets are subject to variation, guided by an interest rate model that dynamically adjusts based on platform liquidity utilization. This model ensures that rates for deposits and loans are reflective of real-time market conditions and platform usage. The interest rate for both depositors (lenders) and borrowers is determined by the new liquidity (NewLiquidity) in relation to the current liquidity (Liquidity) of the platform. 

$$
Ratio = \frac{NewLiquidity}{Liquidity}
$$

Therefore, the new liquidity “l” comes from the **Utilization Rate**.

### Utilization Rate

The essence of interest calculation in OrdiLend's ecosystem is the Utilization Rate, a pivotal factor that dictates the Borrow APR (Annual Percentage Rate) for loans. The fluctuating nature of interest rates for both depositing and borrowing is directly tied to the pool's liquidity—specifically, the proportion of funds loaned out relative to the total liquidity available. A heightened Utilization Rate, indicative of substantial loaned-out liquidity, can lead to adjustments in interest rates.

$$
\rm Utilization\~Rate = \frac{Borrows}{Supplies}
$$

## Borrower Interest Rate

For borrowers on OrdiLend, the Borrow APR is initially determined upon setting up the loan and collateral, adhering to a double-slope curve that is responsive to the pool's Utilization Rate. The formula for calculating the borrower's interest rate (R) integrates the APR and Utilization Rate (U), remaining susceptible to changes influenced by market dynamics and strategic decisions by the OrdiLend DAO.

<table><thead><tr><th>Asset</th><th width="152">Optimal</th><th>Slope 1</th><th>Slope 2</th></tr></thead><tbody><tr><td>ETH/BTC</td><td>90%</td><td>4%</td><td>75%</td></tr><tr><td>USDC</td><td>80%</td><td>4%</td><td>90%</td></tr><tr><td>WORDI</td><td>70%</td><td>5%</td><td>80%</td></tr><tr><td>WSATS</td><td>65%</td><td>8%</td><td>100%</td></tr><tr><td>More Assets...</td><td></td><td></td><td></td></tr></tbody></table>

*These figures can change at any time based on market conditions and the strategic choices of the DAO*

The calculation is as follows:

#### **Ex)** $$where~~U\_t~~max =1$$

#### Slope Under Utilized :

$$
if\~U\_t < U\_{otimal} : R\_t = R\_0 + \frac{U\_t}{U\_{otimal}} \times R\_{slope1}
$$

#### Slope Over Utilized :

$$
if\~U\_t ≥ U\_{otimal} : R\_t = R\_0 + R\_{slope1}+\frac{U\_t-U\_{optimal}}{1-U\_{otimal}} \times R\_{slope2}
$$

This model ensures that the borrower's interest rate is adjusted based on the Utilization Rate's deviation from an optimal threshold. Exceeding this threshold escalates the loan interest rate, augmenting interest accrual for depositors, thereby enhancing deposit appeal to mitigate liquidity deficits. Conversely, a dip below the optimal Utilization Rate diminishes the loan interest rate, fostering loan demand to stabilize the Utilization Rate.

## Supplier Interest Rate Mechanism

On the other side, the Supplier Interest Rate in OrdiLend denotes the earnings for liquidity providers. It's computed through a formula that incorporates "R", the prevailing interest rate, and "U", the Utilization Rate, mirroring the current lending dynamics and demand within OrdiLend.

$$
\rm Supply~~Interest~~Rate = (\it R\_t\times U\_t) \times Reserve\~Factor
$$

*\*Note: The Reserve Factor is a critical component that delineates the fraction of the interest generated from borrower payments that is allocated to the OrdiLend protocol itself.*


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