# Interest Rate Model of #dev DeFi

How Lending & Borrowing interest rates are calculated.

Lending and Borrowing interest rates are calculated due to Utilisation rate.

Utilisation Rate = Total Borrow / Total Lend

## Borrowing interest rate model

At low Utilisation rate, the Borrowing rate is calculated after below formula:

Borrowing Rate= rf +2 ∗ Utilisation Rate ∗ rf

• rf — risk fee free rate: the rate at which #dev DeFi manages to get from other quasi-risk-free protocols.

Borrowing interest rate model of #dev DeFi uses the Kick parameter which follows a jump rate model. When the Utilisation rate reaches a certain ratio, the graph or formula for Borrowing rate changes, we call that the Kick point.

Formula to calculate Borrowing rate changes after Kick point:

Borrowing Interest Rate = (max−rKick)∗ Utilisation Rate / (1−Kick)−(max∗ Kick−rKick)/(1−Kick)

• Kick: the point in the model where the rate of increase in Borrowing interest rate with respect to Utilization rate is at a higher rate, the value of Kick point is determined at 80%.
• rKick - rate at Kick: value of Borrowing interest rate at Kick.
• max: maximum value of Borrowing interest rate which is calculated at 100% Utilisation rate

Each asset has different rf, rKick and max parameter.

## Lending interest rate model

Lending Interest Rate = Borrowing Interest Rate UtilisationRate