Example Scenarios

Scenario 1: Low Utilization

• Pool Size: $1,000,000

• Borrowed: $300,000

• Utilization Ratio: 300,000 ÷ 1,000,000 = 30%

• Interest Rate: 3% (low due to underutilization).

• Result: Encourages borrowing activity to increase utilization.

Scenario 2: High Utilization

• Pool Size: $1,000,000

• Borrowed: $950,000

• Utilization Ratio: 950,000 ÷ 1,000,000 = 95%

• Interest Rate: 15% (high to attract more liquidity providers).

• Result: Encourages liquidity providers to deposit more funds.