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interest rates

Orchid uses an interest rate strategy that adjusts based on utilization.

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Utilization

Utilization is the ratio of borrowed liquidity to total supplied liquidity.

High utilization means:

  • liquidity is scarce

  • borrow rates rise

  • supply yield rises

Low utilization means:

  • liquidity is abundant

  • borrow rates fall

  • supply yield falls

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Variable interest rate model

Orchid can use a model with two regions:

  • below target utilization: borrow rates rise gently

  • above target utilization: borrow rates rise aggressively to protect liquidity

A common parameter set includes:

  • target utilization

  • base rate

  • slope below target

  • slope above target

  • max rate cap

  • rate adjustment cadence

Orchid governance can tune these parameters per asset to match market risk and liquidity needs.

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What this means for users

  • Suppliers earn more when borrowing demand is strong

  • Borrowers pay more when liquidity is tight

  • Rates adapt automatically, no human in the loop required

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