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# Interest Rate Determination

All interest rates in Pando Rings are determined as a function of utilization rate. With the changes in the utilization rate, interest rates continuously fluctuate.

### The Utilization Rate​

The utilization rate for a money market is defined as:

Utilization_rate = market.total_borrows/(market.total_cash + market.borrows - market.reserves)

Where

• market.total_borrows refers to the amount of total borrow of a certain money market
• market.total_cash refers to the amount left in the system of a certain money market
• market.reserves refers to the amount that is kept as profit of a certain money market

The formula can be interpreted roughly as the percentage of money borrowed out of the total money supplied.

A high utilization rate signifies that demand is high and a lot of borrowing is taking place, so interest rates go up as an incentive to get more people to inject cash into the system. A low utilization rate signifies that demand for borrowing is low, so interest rates go down to encourage more people to borrow cash from the system.

### Borrow rate​

Currently, the borrow rate model of all money markets on Rings follow the Jump Rate model.

In this model, there is a key parameter defined as Kink, which is a value of the utilization rate and creates a sharp turning point where the interest rates spike.

The borrow rate of the jump rate model is defined as:

When the utilization rate ≤ Kink:

Borrow_interest_rate = multiplier * market.utilization_rate + base_rate

When the utilization rate > Kink:

Borrow_interest_rate = multiplier * Kink + jump_multiplier * (market.utilization_rate - Kink) + base_rate

Where

• base_rate per year is the minimum borrowing rate
• multiplier per year is the rate of increase in interest rate with respect to utilization
• Kink is the point in the model in which the model follows the jump multiplier
• jump_multiplier per year is the rate of increase in interest rate with respect to utilization after the Kink

### Supply rate​

The supply rate is calculated as follows:

Supply_interest_rate = Borrow_interest_rate * market.utilization_rate * (1 - market.reserve_factor)

Where

• market.utilization_rate is the utilization rate of a certain market
• market.reserve_factor controls what percentage of the interest borrowers pay for a certain market is kept within the system to protect lenders against borrow default and liquidation malfunction
• Borrow_interest_rate is the interest rate that borrowers pay for a certian market

### Parameters of all Pando Rings' money markets​

(last updated on Oct 18, 2021)

Currently, all money markets has a Kink of 80%, meaning, when utilization ratio reaches 80%, both the supply and borrow interest rates will have a sudden jump.

SymbolNamebase_ratereserve_factormultiplierjump_multiplierkink
pUSDPando USD0%15%5.8%1.47680%
USDTTether USD0%15%5.8%1.47680%
BTCBitcoin0%20%29.13%3.625580%
ETHEthereum0%20%29.13%3.625580%
LTCLitecoin0%20%29.13%3.625580%
EOSEOS0%20%29.13%3.625580%
DOTPolkadot0%20%29.13%3.625580%
XINMixin0%20%29.13%3.625580%
MOBMoblieCoin0%20%29.13%3.625580%
BOXBoxToken0%20%29.13%3.625580%
DOGEDogeCoin0%20%29.13%3.625580%

For pUSD and USDT:

For BTC, ETH, LTC, EOS. DOT, XIN, MOB, BOX and DOGE:

It is important to understand the interest rate model of your selected money markets and monitor the changes in the interest rates for the profitability and safety of your assets.