Interest Rate Models in DeFi Explained
Interest Rate Models in DeFi Explained
馃 DeFi's Secret Rate Controller
Interest rate models are the automated mechanisms that power DeFi lending platforms, ensuring market equilibrium through dynamic rate adjustments.
Key aspects:
- Automatically balances supply and demand
- Increases rates when borrowing demand is high
- Decreases rates when there's excess liquidity
- Helps maintain optimal utilization ratios
This fundamental DeFi building block enables efficient capital allocation across lending markets without manual intervention. Understanding these models is crucial for both lenders and borrowers participating in decentralized finance protocols.
Ever wondered how lending platforms automatically adjust their rates? This week's comic explores Interest Rate Models - the mechanism that keeps DeFi lending markets balanced. I is for Interest Rate Model 馃尡
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