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Interest Rates

Every token in a given silo has an algorithmic interest rate model (IRM) that sets the borrow interest rate in relation to the token's utilization in the market, with higher interest rates set when utilization is high and lower rates when utilization is low.

Interest rates intend to ensure there is always enough liquidity for depositors to withdraw while receiving acceptable interest from borrowers - supply-demand equilibrium.

Interest Rate Models​

Silos are IRM-agnostic, meaning markets can be deployed with any arbitrary IRM. Regardless, the Silo Protocol has several pre-configured IRM designs that deployers can choose from.

Dynamic Kink with PI Controller​

This model sets an optimal utilization range where borrow rates remain stable. Utilization beyond the optimal range causes rates to increase, encouraging utilization back to optimal by attracting deposits or encouraging loan repayments.

Borrow APR for the Dynamic Kink with PI Controller Model example

It has a critical utilization threshold where rates will increase rapidly to encourage new repayments and deposits.

Dynamic Kink​

This model has a gradual rate progression where borrow rates increase linearly with utilization.

Borrow APR for the Dynamic Kink Interest Rate Model example

It has a critical utilization threshold where rates will increase rapidly to encourage new repayments and deposits.

Fixed​

This model has a fixed borrow rate at all utilization inputs.

Borrow APR for the Fixed Interest Rate Model example

This is ideally paired with fixed yield tokens such as Pendle PTs.