📊 Interest Rates: Supply & Demand Curves
Learn how rates adjust based on utilization automatically
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0 / 5 completed📈 Interest Rates & APY
Interest rates in DeFi lending are algorithmically determined based on supply and demand. Unlike banks with fixed rates, DeFi rates adjust in real-time to market conditions.
How Rates Are Determined
Interest rates are calculated using the utilization rate—the percentage of available assets that are currently borrowed. Higher utilization means higher rates to attract more lenders.
Utilization Rate Formula
Example: If $70M is borrowed from a $100M pool, utilization is 70%. This drives the interest rate calculation.
🎮 Interactive: Utilization Impact
Adjust pool utilization to see how it affects interest rates:
Rate Behavior:
Moderate utilization (70%) is near optimal. Rates are balanced for both sides.
🎮 Interactive: Interest Calculator
Calculate how much interest you'll pay on a loan:
Note: Interest compounds continuously (per block). Actual amount may vary slightly based on when you repay. Rates also change as utilization fluctuates.
🎮 Interactive: Rate Type Comparison
Compare stable vs variable rate models:
Variable Rate
Dynamic rate that changes with market conditions
✓ Benefits
- • Usually lower than stable
- • Adjust automatically to market
- • More capital efficient
- • Available everywhere
✗ Drawbacks
- • Rate can spike unexpectedly
- • Unpredictable costs
- • Need to monitor constantly
- • Risky during volatile markets
Typical Rate Ranges by Platform
| Platform | Asset | Supply APY | Borrow APY |
|---|---|---|---|
| Aave | USDC | 3.2% | 5.8% |
| Compound | ETH | 2.1% | 3.9% |
| MakerDAO | DAI | 4.5% | 6.8% |
| Curve | Stables | 5.2% | N/A |
*Sample rates - actual rates vary based on real-time market conditions
Rate Strategy Tips
- •Variable for short-term: Lower rates if you plan to repay quickly
- •Stable for long-term: Lock in rate if you expect market volatility
- •Monitor utilization: High utilization often means rate spikes incoming
- •Compare platforms: Rates differ across protocols—shop around