Interest Rate Model

Risk

Rates that respond to utilization.

Rheofi uses a Jump Rate Model that scales borrow cost with how much of a market's liquidity is in use. Below the kink, rates rise gently; above it, they jump steeply — discouraging extreme utilization while keeping a buffer for withdrawals.

UUtilization rate — total borrows divided by total supply

70–90%Typical kink point — where the jump multiplier kicks in

RIPAll parameters adjustable via governance proposal

Interest rates for both suppliers and borrowers derive from the same utilization curve. A higher utilization signals scarce liquidity and pushes rates up; lower utilization keeps rates suppressed. Governance can adjust the curve's shape per market through Rheofi Improvement Proposals (RIPs).

Utilization rate

The utilization rate represents the proportion of supplied assets currently being borrowed in a given market:

$U = \frac{\text{Total Borrows}}{\text{Total Supply}}$

A higher utilization rate indicates more of the available liquidity is in use, while a lower rate signals excess idle capital.

Borrow rate — below the kink

Below the kink utilization, the borrow rate rises linearly with U:

$R_{\text{borrow}} = R_{\text{base}} + U \times R_{\text{multiplier}}$

Where R_base is the base rate, U is utilization, and R_multiplier is the rate slope.

Borrow rate — above the kink

Once utilization exceeds the kink, a steeper R_jump multiplier is applied to the excess:

$R_{\text{borrow}} = R_{\text{base}} + U_{\text{kink}} \times R_{\text{multiplier}} + (U - U_{\text{kink}}) \times R_{\text{jump}}$

This kink mechanism discourages extreme utilization, keeping a buffer of liquidity available for withdrawals and liquidations even when demand spikes.

How the curve behaves

Gentle slope under the kink

Capital is efficient: borrowers get predictable, slowly-rising rates while suppliers earn proportional yield without spikes.

Sharp jump above the kink

Utilization beyond the kink triggers a steep rate jump. Borrowers are nudged off, suppliers are paid more — restoring buffer liquidity.

Per-market tuning

Base rate, multiplier, jump multiplier, and kink point are all governance-adjustable per market via RIPs.

Risk ManagementWhere IRM fits in the layered defense→JumpRateModelV2Solidity reference for the implementation→Protocol MathExchange rate, APY, redemption value→