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Interest rates
Interest rates for lenders are calculated according to how much BNB inside the Bigfoot Bank is being borrowed at any given time. Interest rates will increase as higher percentages of BNB 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 BNB being borrowed / BNB available to borrow.
The Bigfoot Bank 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 BNB funds in the Bigfoot Bank.
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 Bigfoot platform for additional development of not only the Bigfoot platform but also the Eleven Finance ecosystem as a whole.
Similar to our vault model, the underlying quantity bfBNB that is given to the lender on starting to lend will stay the same. The value of this bfBNB will slowly increase, and be realised in BNB when the user withdraws from a lending position. For example, if a user lent 100 BNB and received 95 bfBNB 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 Bigfoot Bank with their 95 bfBNB they would withdraw 109 BNB.
Last modified 6mo ago
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