📊Interest Rate Model

At SolidLizard Lending, all interest rates are determined based on a metric called the utilization rate. The interest rates within the app are directly linked to this utilization rate, which essentially represents the proportion of total assets borrowed compared to the total assets supplied. A high utilization rate signifies a significant amount of borrowing activity, whereas a low ratio indicates the opposite.

SolidLizard's interest rate models are designed to adapt dynamically by taking the utilization rate into account. When the utilization rate is high, it leads to higher interest payments from borrowers, which, in turn, results in higher interest payments to suppliers. This system encourages suppliers to inject more assets into the protocol, ensuring a healthy supply of available liquidity.

Currently, SolidLizard Lending employs the Jump Rate Model, which excels in incentivizing liquidity, particularly in situations of higher utilization rates.

The interest model in details

Utilization Rate: This pivotal metric governs the interest rate, denoting the proportion of borrowed assets to supplied assets in a given market.

Base Rate: This sets the floor for the interest rate when the utilization rate is low.

Multiplier: This dictates the pace at which the interest rate escalates with rising utilization rates.

Kink: This denotes a specific utilization threshold within the model.

Jump Multiplier: This comes into play after surpassing the kink point, leading to a more rapid increase in the interest rate for higher utilization rates.

By employing this framework, SolidLizard Lending aims to:

• Reward Suppliers: Elevated utilization (greater borrowing) translates to heightened interest rates for suppliers.

• Encourage Repayment: Borrowers encounter elevated interest rates with increasing utilization, motivating them to settle their loans promptly and uphold liquidity.

In essence, the jump rate model facilitates the maintenance of a balanced equilibrium between supply and demand within SolidLizard Lending's lending markets.