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)
Deposit rate
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”.
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