Standard Model

The standard model is used for markets that have relatively lower historical utilization (typically below 80%). Under the standard model, here are how the rates are calculated:

Borrow rate

Base Rate + (Multiplier x Utilization Rate)

Base Rate 
+ 
(Multiplier x Utilization Rate) 

Deposit rate

Borrow Rate x Utilization Rate x (1 - Reserve Factor) 

The Key Parameters are defined as below;

Base Rate

The minimum (floor) borrowing rate

Multiplier

Scale factor per utilization

Utilization Rate

Total Assets borrowed / Total assets Deposited

Reserve Factor

Percentage of the spread between Deposit & borrow (the protocol's revenue to be kept in treasury)

From the formula, we can see that Utilization Rate is the only dynamic parameter, whereas Base Rate, Multiplier, and Reserve Factor are determined as “constant”.