Eleven Finance
Interest Rates
Interest rates for lenders are calculated according to how much collateral inside the eleBANK is being borrowed at any given time. Interest rates will increase as higher percentages of collateral are being borrowed in order to incentivise lending and will reduce when the opposite occurs to incentivise borrowing. This uses a figure known as the “Utilisation %” to calculate the interest rate at any given time. This is simply a percentage of collateral being borrowed / collateral available to borrow.
The eleBANK will use a triple slope interest rate model based on that utilised by Alpha Finance’s Alpha Homora’s protocol (https://alphafinancelab.gitbook.io/alpha-homora/interest-rate-model) to set rates. This means the interest rate for the platform will be correlated to the “Utilisation %” where the system is most incentivized to aim for between 80-90% utilisation of collateral funds in the eleBANK.
A graph of how this rate scales to best achieve this is below:
At any given time the interest rate for the platform that is set by the above model is that which is charged to borrowers. This rate is charged to any leveraged position and taken as a percentage of the overall debt size of the given position, this is charged to the lender on a per second basis, based on the platform interest rate at the time.
For lenders, they will receive an annual interest rate of 89% of what is charged to borrowers, eg if the model above has the interest rate of 10%, the lending interest rate will be 8.9%. This annualised rate is accrued by the lender and accrued to the lender on a per second basis.
The additional 11% of interest fees is taken back in by the Eleven Finance platform for additional development of the Eleven Finance ecosystem as a whole (this includes payments to the Eleven Finance Recovery Vault).
Similar to our vault model, the underlying quantity eleBANK (this could be eleUSD, eleBTC, eleETH or eleMATIC) that is given to the lender on starting to lend will stay the same. The value of this eleBANK will slowly increase, and be realised in the underlying leant assest when the user withdraws from a lending position. For example, if a user lent 10 ETH and received 9.5 eleETH in return, and continued to lend for a year, if the platform rate stayed at 10% for the whole year, when the user exited their lending position, withdrawing from the eleETH bank with their 9.5 eleETH they would withdraw 10.9 ETH.
Copy link