Interest Rates
How do loan interest rates work?
YieldBlox's interest rates are based on demand and will fluctuate based on the borrowed assets utilization ratio. Interest rates accrue onto the borrower's liability balance over the lifecycle of their loans. Interest does not need to be repaid until loan repayment.
What is a Utilization Ratio?
An assets utilization ratio is the percentage of deposited assets in the pool that are currently lent out. It is used to calculate the variable interest rate paid by borrowers.
Where do the interest fees go?
The fees generated by interest are paid to the lending pool. Lenders will receive these fees when they burn the pool tokens they received by lending.
Additionally, the underlying assets YBX fee allocation value is greater than 0, a corresponding portion of interest fees are used to repurchase and distribute YBX to YBX escrows. For example if an assets YBX fee allocation is set to .1, 10% of interest paid by borrowers of that asset is used to purchase YBX and send it to the YBX escrow pool, which will distribute the YBX to escrows when they burn their veYBX upon escrow unlock. YBX fee allocations are set by YieldBlox Governance.
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