# Interest Rates

All USDi borrowers pay a single borrowing interest rate that varies depending on the current reserve ratio. The interest paid by borrowers, net of a protocol fee, is distributed pro rata to all USDi holders.

## Reserve Ratio

The *reserve ratio* is defined as

The reserve ratio measures the amount of USDC liquidity that the protocol currently has to meet the potential redemption demand of USDi holders.

## Interest Rate

The borrow APR is a decreasing function of the reserve ratio and is defined as follows:

The function has two kinks, $(s_1,r_1)$ and $(s_2,r_2)$. The interval $[s_1,s_2]$ is the range of reserve ratios that the protocol targets. The current parameters are provided in the table below.

$s_1$ | $s_2$ | $r_1$ | $r_2$ | $r_3$ | |
---|---|---|---|---|---|

60% | 40% | 0.5% | 10% | 600% |

Given the protocol fee rate of $f$, the deposit rate is determined as follows:

The figure below plots the borrow and deposit rates at each level of reserve ratio: