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  • Introduction
    • Overview
    • FAQ
    • Concepts
      • Liquidity Protocol
      • Supply
      • Borrow
      • Withdraw
      • Liquidations
      • mtTokens
      • Stablecoin
      • Dividends
    • Basic Principles
  • Tokenomics
    • MUTM
      • Allocations
    • Presale Phases
  • Protocol Stability
    • Asset Integration Process
    • Protocol Safeguards and Parameter Framework
    • Market Volatility & Liquidity
    • Price Discovery
    • Address Screening and Wallet Blocking
    • Bug Bounty Program
    • Client Application Security
    • Prevention of Potential Insolvency
    • Model Parameters
    • Mitigating Liquidity Risks for mtTokens
  • Interest Rate Model
    • Borrow Interest Rate and Liquidity Management
    • Stable Interest Rate Model
  • Stablecoin
    • Principle
    • Multi-Asset Collateralization
    • Yield-Generating Collateral
    • Autonomous Minting and Redemption
    • Interest and Discount Rates
    • Issuers
    • Mutuum’s Stablecoin Implementation
    • Borrowing Mutuum’s Stablecoin
    • Repaying and Liquidating Mutuum’s Stablecoin
    • Arbitrage
  • EXTRA
    • L2 Cost Optimization
    • Roadmap
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  1. Interest Rate Model

Borrow Interest Rate and Liquidity Management

PreviousMitigating Liquidity Risks for mtTokensNextStable Interest Rate Model

Last updated 2 months ago

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The borrow interest rate is derived from the utilization rate, which indicates how much capital is actively being borrowed compared to the total pool supply. This rate model helps Mutuum balance liquidity through incentives:

  • When capital is abundant: Interest rates remain comparatively low, encouraging borrowers to take loans, thus putting idle assets to use.

  • When capital is scarce: Interest rates escalate to motivate loan repayments (reducing outstanding debt) and attract additional deposits from potential lenders seeking higher yields.