Pluz Finance
  • Overview
  • PRODUCT
    • Get started
    • Lending
      • Benefits of Lending with Pluz
      • Why it's more capital efficiency?
      • Interest rates
    • Borrowing
      • How it works for borrowing
      • Liquidation
  • SECURITY
    • Risks
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Interest rates

The interest rate for lenders on Pluz Finance is dynamically adjusted based on the supply and demand of assets within the platform. This mechanism ensures that lenders receive competitive returns while maintaining the stability and efficiency of the lending pool.

How Interest is Calculated

  1. Dynamic Supply and Demand: The interest rate fluctuates in response to the amount of assets supplied and borrowed on the platform. When demand for borrowing increases, interest rates rise to incentivize more lenders to deposit their assets.

  2. Utilization Rate: The utilization rate, which is the ratio of borrowed assets to supplied assets, plays a crucial role in determining the interest rate. A higher utilization rate indicates higher demand for borrowing, leading to increased interest rates for lenders.

  3. Algorithmic Adjustments: Pluz Finance employs an algorithm that automatically adjusts interest rates in real-time. This algorithm takes into account various factors, including the total liquidity in the pool, current borrowing demands, and overall market conditions.

Formula and Calculation

The interest rate is calculated using the following components:

  • Base Rate: A fixed minimum rate provided to lenders regardless of market conditions.

  • Utilization Rate (U):

π‘ˆ=π‘‘π‘œπ‘‘π‘Žπ‘™π΅π‘œπ‘Ÿπ‘Ÿπ‘œπ‘€/π‘‘π‘œπ‘‘π‘Žπ‘™π‘†π‘’π‘π‘π‘™π‘–π‘’π‘‘U=totalBorrow/totalSupplied

  • Interest Rate (IR):

𝐼𝑅=π΅π‘Žπ‘ π‘’π‘…π‘Žπ‘‘π‘’+(π‘ˆβˆ—π‘€π‘’π‘™π‘‘π‘–π‘π‘™π‘–π‘’π‘Ÿ)IR=BaseRate+(Uβˆ—Multiplier)

Example Calculation

If the base rate is 2%, the multiplier is 20%, and the utilization rate is 50%:

𝐼𝑅=2%+(0.5βˆ—20%)=12%IR=2%+(0.5βˆ—20%)=12%

This means the interest rate for lenders would be 12%.

Benefits of Dynamic Interest Rates

  • Competitive Returns: Lenders can benefit from higher returns during periods of high borrowing demand.

  • Efficient Capital Utilization: Ensures that the assets in the lending pool are efficiently utilized, contributing to the overall health of the platform.

  • Market Responsiveness: The dynamic adjustment mechanism allows Pluz Finance to respond quickly to market changes, maintaining a balanced and stable lending environment.

Lender Protection

To protect lenders, Pluz Finance employs several risk management strategies, including regular audits of smart contracts, an insurance fund to cover potential losses, and automated liquidation mechanisms to manage collateral risks.

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Last updated 10 months ago