Interest Rate Model of #dev DeFi

#dev DeFi
2 min readJul 13, 2021


How Lending & Borrowing interest rates are calculated.

Interest rate model on #dev DeFi
Interest rate model on #dev DeFi

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.

Borrowing rate graph of CAKE token in #dev DeFi
Example of CAKE borrowing rate graph.

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

The return to Lenders is determined as:

Lending Interest Rate = Borrowing Interest Rate UtilisationRate

CAKE lending interest graph on #dev DeFi
CAKE lending interest graph.



#dev DeFi

#dev DeFi is an aggregate lending and borrowing protocol on the Binance Smart Chain (BSC).

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