Standard Model

Standard Model is used for markets that have relatively lower historical utilization (typically below 80%). Under the standard model, here are how the rates are calculated:

Borrow rate: Base Rate + (Multiplier x Utilization Rate)

Supply rate: Borrow Rate x Utilization Rate x (1 - Reserve Factor)

where

Base Rate = The minimum (floor) borrowing rate

Multiplier = Scale factor per utilization

Utilization Rate = Asset borrowed / Total asset supply

Reserve Factor = Percentage of spread between supply & borrow (the protocol's revenue to be kept in treasury)

From the formula, we can see that Utilization Rate is the only dynamic parameter, whereas Base Rate, Multiplier, and Reserve Factor are determined as “constant”.