> ## Documentation Index
> Fetch the complete documentation index at: https://docs.pulend.art/llms.txt
> Use this file to discover all available pages before exploring further.

# Interest Rates

> Dynamic rate model based on utilization

## Rate Model

Pulend uses a **utilization-based interest rate model**. Rates adjust automatically based on how much of the pool is borrowed.

```mermaid theme={null}
graph LR
    U[Utilization] --> R[Interest Rate]
    R --> BR[Borrow Rate]
    R --> SR[Supply Rate]
```

## Utilization Rate

$$
\text{Utilization} = \frac{\text{Total Borrowed}}{\text{Total Supplied}}
$$

| Utilization | Meaning                              |
| ----------- | ------------------------------------ |
| 0%          | No borrowing activity                |
| 50%         | Half of supplied assets borrowed     |
| 80%         | Optimal target utilization           |
| 100%        | All assets borrowed (no withdrawals) |

## Rate Curve

The interest rate follows a kinked curve:

| Range         | Behavior              |
| ------------- | --------------------- |
| 0% - Optimal  | Gradual rate increase |
| Above Optimal | Steep rate increase   |

### Parameters

| Parameter            | Description                        |
| -------------------- | ---------------------------------- |
| `baseRate`           | Minimum interest rate              |
| `optimalUtilization` | Target utilization (typically 80%) |
| `rateAtOptimal`      | Rate at optimal utilization        |
| `scaledPercentage`   | Multiplier for rates above optimal |

## Supply vs Borrow Rate

**Supply APY** = Borrow Rate × Utilization

Suppliers earn a portion of what borrowers pay, proportional to pool utilization.

<Note>
  Higher utilization means higher returns for suppliers but also higher costs
  for borrowers.
</Note>