Interest Rates are determined by supply and demand. More specifically, by the ratio of the supply of NFTs in the Unreserved section of the 🔓MarketVault to the demand for 🖼️NFT Index Token by 🙋Borrowers collateralizing loans with NFTs.
Utilization Rate
Utilization Rate U
of the MarketVault m
is measured via the amount of borrowed 🖼️NFT Index Token b
over the total circulating supply of $NFT c
, denoted as:
Um=$NFTc$NFTbUm=Utilization Rate$NFTb=Borrowed $NFT$NFTc=Circulating $NFT Supply Borrow and Stake Rates
The Borrow Rate corresponding to each value of Um is defined by a piecewise linear function whose slopes and intercepts can be modified by the DAO.
BorrowRate={.03625Um+0.1%1.1Um−85%if 0<U<0.8if 0.8<=U<1.0 The Staking Reward is determined by the proportion of circulating 🖼️NFT Index Token staked, the Borrow Rate, the Utilization Rate of the 🔓MarketVault, and the amount held back by the protocol as reserves:
Staking Reward=Stake RateBorrow Rate⋅Um−Reserve$NFTs=Staked $NFTStakeRate=$NFTc$NFTsReserve=BorrowRate∗Spread∗Um Spreads
The reserve that is held back by the protocol, which is a spread between the stake and borrow rate, is distributed between staked $FUNG holders and staked 🖼️NFT Index Token, with ten percent (10%) going to staked $FUNG holders and ninety percent (90%) going to staked $NFT holders.