# Interest Rates ## **Dynamic Interest Rates on Curvance** Interest rates within the platform are dynamic, adjusting in real-time to meet market demand within each lending pool. Inspired by models like Fraxlend, Rari, and Kashi, Curvance’s rates are determined by factors including pool utilization, usage multiplier, and time decay, ensuring stability and flexibility as conditions change. ### **Interest Rate Adjustments** * **Pool Utilization**: This metric reflects the proportion of total funds in a lending pool actively borrowed by users. A higher pool utilization rate indicates that a larger portion of the pool’s funds are being borrowed, while a lower rate shows more lending capacity. * **Interest Rate Dynamics**: As pool utilization increases and nears maximum capacity, interest rates progressively rise, significantly beyond a set “vertex point.” This vertex point serves as a threshold where rates begin to accelerate, responding dynamically to increased demand and incentivizing liquidity supply. * **Time Decay**: Interest rates adjust with a gradual decay over regular intervals (example: every 10 minutes). If utilization drops below the target rate, the vertex multiplier lowers, leading to a decrease in rates to maintain stability. ### **Example Scenario:** *Initial State*: A lending pool contains 1,000,000 USDC, of which 700,000 USDC is borrowed, resulting in an 70% utilization rate with an interest rate of 2%. * **Surge in Utilization**: If a large borrower enters and takes an additional 200,000 USDC, pushing utilization to 90%, the interest rate rises significantly due to exceeding the 85% vertex point. In this scenario, rates increase to 8%, which then increase every 10 minutes until utilization decreases. This dynamic adjustment encourages borrowers to consider repayment while incentivizing suppliers to add more USDC to the pool, helping balance demand and maintain liquidity. The system’s responsiveness promotes an equilibrium within the lending ecosystem, supporting stability and addressing the evolving needs of the protocol users. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.curvance.com/app/protocol-overview/liquidity-markets/interest-rates.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.