Interest Rate Model

Omneon uses a dynamic interest rate model that automatically adjusts rates based on supply and demand, ensuring optimal capital efficiency and fair pricing.

📈 Rate Calculation Formula

Utilization Rate

Utilization = Total Borrowed ÷ Total Supplied

Example:
- Total Supplied: 100,000 vUSD  
- Total Borrowed: 60,000 vUSD
- Utilization: 60%

Borrow Rate Formula

if Utilization ≤ Optimal Utilization (80%):
    Borrow Rate = Base Rate + (Utilization × Slope1) ÷ Optimal Utilization

if Utilization > Optimal Utilization (80%):
    Borrow Rate = Base Rate + Slope1 + ((Utilization - Optimal) × Slope2) ÷ (100% - Optimal)

Current Parameters

Parameter	Value	Description
Base Rate	2%	Minimum interest rate when utilization = 0%
Slope 1	4%	Rate increase up to optimal utilization
Slope 2	60%	Steep rate increase after optimal utilization
Optimal Utilization	80%	Target utilization for the pool

📊 Rate Examples

At Different Utilization Levels

Utilization	Borrow Rate	Supply Rate	Scenario
0%	2.0%	0.0%	No borrowing demand
20%	3.0%	0.45%	Low demand
40%	4.0%	1.2%	Moderate demand
60%	5.0%	2.25%	Good demand
80%	6.0%	3.6%	Optimal utilization
90%	21.0%	14.18%	High demand
95%	36.0%	25.65%	Very high demand

Supply Rate Calculation

Supply Rate = Borrow Rate × Utilization × (100% - Reserve Factor)

Reserve Factor = 25% (goes to protocol treasury)

Example at 60% utilization:
Supply Rate = 5.0% × 60% × 75% = 2.25%

📉 Rate Dynamics

Low Utilization (0-40%)

• Rates: Low and gradually increasing

• Incentive: Attract more borrowers

• Lender Returns: Lower but stable

Moderate Utilization (40-80%)

• Rates: Steady increase toward optimal

• Incentive: Balanced supply and demand

• Lender Returns: Attractive yields

High Utilization (80-100%)

• Rates: Sharp increase to protect liquidity

• Incentive: Encourage repayment and new supply

• Lender Returns: High yields but liquidity risk

📊 Comparison with Other Protocols

Protocol	Base Rate	Optimal Util	Max Rate	Model Type
Omneon	2%	80%	~66%	Two-slope
Compound	2%	80%	~60%	Two-slope
Aave	0%	80%	~53%	Two-slope

Omneon Advantages

• Higher base rate provides minimum yield to lenders

• Steeper penalty rates protect liquidity

• Optimized for IOTA ecosystem volatility patterns