Drift Protocol v2

โŒ˜K
๐Ÿ‘พWelcome to Drift Protocol
๐ŸงฎDrift DEX
๐Ÿ‘‹Getting Started
๐Ÿ“ˆPerpetual Futures
๐Ÿ“ŠSpot Margin Trading
๐ŸฆBorrow & Lend
๐Ÿ›๏ธStaking
๐ŸชMarket Makers
๐Ÿ”ฌTechnical Explanations
๐Ÿ“Accounting and Settlement
โž—Borrow Interest Rate
๐Ÿ“œDelisting Process
โ›ฒDrift AMM
๐ŸƒJust-In-Time (JIT) Auctions
๐Ÿ“šKeepers & Decentralised Orderbook
โ˜ ๏ธLiquidators
๐Ÿ’งLiquidity Providers (LPs)
๐Ÿ“‹Protocol Guard Rails
๐Ÿ“Risks
๐Ÿ–ฅ๏ธDeveloper Resources
๐Ÿ“”Program/Vault Addresses
โŒจ๏ธSDK Documentation
โŒจ๏ธTutorial: Bots
โš ๏ธTroubleshooting
๐Ÿ› ๏ธKeeper Bots
๐Ÿ› ๏ธTrading Bots
โŒจ๏ธHistorical Data (v1)
โŒจ๏ธAPI
๐Ÿ›ก๏ธSecurity
๐Ÿ›ก๏ธAudits
๐Ÿ›ก๏ธBug Bounty
โš–๏ธLegal and Regulations
๐Ÿ“Terms of Use
๐Ÿ“Disclaimer
๐Ÿ“Privacy Policy
๐Ÿ“Competition Terms and Conditions
๐Ÿ“šGlossary
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3min

Borrow Interest Rate

Drift's lending pools work similarly to the lending pools of Aave.

Each market has an optimal borrow rate and max borrow rate and uses this piecewise function based on the Utilisation Rate (U).

The Utilisation Rate represents the availability of capital within the system.

  • If U is high -- there is abundant capital within the system and the protocol users are given incentives in the form of low-interest rates to encourage borrowing;
  • If U is low -- capital within the system is scarce and the protocol will increase interest rates to incentivise more capital supply and repayment of debt.

๏ปฟ๏ปฟInterest Rate Model๏ปฟ๏ปฟ

Note: this model has been adapted from Aave's interest rate model. The parameters and model will be iterated and improved as Drift's borrow lend engine grows. Last Updated: 21 October 2022.

The interest rate is based on the borrow utilisation.

Liquidity risk materialises when utilisation is high and this becomes more problematic as U gets closer to 100%.

To tailor the model to this constraint, the interest rate curve is split into two parts around an optimal utilisation rate Uo. Before Uo the slope is small, after it begins rising sharply.

The interest rate (InterestRate) model:

๏ปฟ

The resulting model produces the following graph:

๏ปฟ

๏ปฟ

Updated 21 Feb 2023
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