Borrowing Interest Rate

Introduction

The goal of the bank’s incentive structure is to maximize the pool utilization (better capital efficiency) while also leaving sufficient space for the BNB lenders to freely enter and exit the pool. This is achieved by a dynamic interest rate paid by Yield Farmers and Liquidity Providers to the Bank (BNB lenders).

The interest rate is dependent on the utilization rate: As the bigger share of BNB deposited into the bank gets lent out to Yield Farmers and Liquidity Providers, the interest rate also goes up. The interest rate model means that there are two distinct sweet spots for utilization: 80-90% (where the interest rate is actually fixed) and 90% for highly active market times (with a steep rise to disincentivize 200% utilization).

The table and the curve can be seen below.

iBNB Interest Rate Model

Utilization Rate

Interest Rate

0-80% utilization rate

interest rate goes up linearly to 20%

80-90% utilization rate

20% (fixed)

90-100% utilization rate

interest rate goes up linearly to 200%

iBUSD Interest Rate Model

Utilization Rate

Interest Rate

0-80% utilization rate

interest rate goes up linearly to 10%

80-90% utilization rate

10% (fixed)

90-100% utilization rate

interest rate goes up linearly to 50%