Interest Rates Mechanism

Zest Interest Rates Mechanism

Borrowing rates on Zest Protocol adjust dynamically based on key pool metrics:

– Utilization Rate: Represents the proportion of funds currently lent out. It is calculated as the amount borrowed divided by the total pool size (borrowed + available). Example: If 70% of the pool is in use, the utilization rate is 70%.

– Target Utilization Rate: The optimal usage level the protocol aims to maintain. At this threshold, interest rates are are calibrated to promote balanced activity between lenders and borrowers.

– Interest Rate at Target Utilization: The borrowing rate applied when the pool is operating at its target utilization—designed to support steady borrowing demand while maintaining pool stability.

– Maximum Borrowing Rate: As utilization exceeds the target threshold, borrowing rates increase progressively until they reach a capped maximum. This mechanism encourages repayments and helps protect pool liquidity.

To explore interest rate behaviour for a specific asset, navigate to the Borrow Stacks Market, click ‘Asset Overview’, then select ‘Details’.

Scroll down to view a chart showing current utilization, the target rate, and how borrowing rates adjust based on pool usage.