ForTube Bank adopts an algorithm-driven interest rate model , where the interest rate is automatically adjusted according to changes in the relationship between supply and demand, so as to adjust factors such as the total size of loans and the amount of fund supply.
In terms of the adjustment and control of loans, the Bank follows the following principles.When the lending amount in the loan pool is low: loan interest rate increases slowly to encourage borrowers to borrow from the loan pool; And when the lending amount in the loan pool is high, or even close to saturation, loan interest rate increases quickly to boost deposit interest rate and encourage lenders to deposit more funds to the loan pool. The adjustment by algorithm can ensure that the loan pool develops and increases healthily.
To quantify the amount of the lent asset, we introduce parameter x to represent the lent proportion of stablecoin a:
Let the borrowing interest rate be y, and the relationship between y and x can be demonstrated as a piecewise function as follows:
As shown in the formula, ForTube Bank divides the change of interest rate into three stages:
First stage. In order to stimulate the increase in loan amount in the initial stage, the interest rate growth model approximates an exponential curve, which also conforms to the law of natural growth.
Second stage. By accumulating a certain amount of borrowings, the growth of interest rate becomes stable, and becomes a line with a certain slope in the graph.
Third stage. As the amount of lended assets becomes significant, the loan interest rate grows faster, in order to properly control the pace of lending funds and boost the amount of deposits. The pace of the increase in interest rates will gradually approach an extreme value, which is demonstrated as a modified exponential curve.
Accordingly, the formula for SIR (Savings Interest Rate) is:
x = The lending proportion of stablecoin a
y = The lending interest rate for stablecoin a
s = Adjustment ratio (0 ≤ s < 1, normally 0.1)