# Interest Rate Model

<figure><img src="https://3038127767-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FHdS59PJdwI8kEK3vLZuH%2Fuploads%2FAJwVLAMG6Hk5yAkdhpH1%2Ffunction%20%20update%20(5).png?alt=media&#x26;token=874a3014-f334-4cfe-8dd8-8f1fb2db2dbd" alt=""><figcaption></figcaption></figure>

<table><thead><tr><th width="469">Interest Model</th><th>Typicial Assets</th></tr></thead><tbody><tr><td><strong>Interest Rate Model 1:</strong><br>Borrowing rate applicable for assets with high market cap.</td><td>ETH<br>USDC</td></tr><tr><td><strong>Interest Rate Model 2:</strong><br>Borrowing rate applicable for most assets.</td><td>VELO<br>OP<br>SNX</td></tr><tr><td><strong>Interest Rate Model 3:</strong><br>Borrowing rate applicable for Stable Pool &#x26; LST Pools.</td><td>USDC (for sAMM pools)<br>DOLA<br>FRAX<br>USDR<br>wstETH<br>and other stable or LST assets</td></tr></tbody></table>

<div align="left"><figure><img src="https://3038127767-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FHdS59PJdwI8kEK3vLZuH%2Fuploads%2FPhWQjRvw2S5NjAqH8Xj6%2Fimage.png?alt=media&#x26;token=bf04fd19-0059-4ef8-a38a-ab1df88c7623" alt=""><figcaption><p> Borrowing Interest Rate - Appliable for assets with high market cap.<br>x-axis: utilization, y-axis: borrowing interest rate</p></figcaption></figure></div>

<div align="right"><figure><img src="https://3038127767-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FHdS59PJdwI8kEK3vLZuH%2Fuploads%2F6SKgo69DXGHXEwGSZdNG%2Fimage.png?alt=media&#x26;token=1751d2cf-51a9-4fbf-90c8-1304e0b86904" alt=""><figcaption><p> Borrowing Rate - Appliable for most assets<br>x-axis: utilization, y-axis: borrowing interest rate</p></figcaption></figure></div>

Specifically, for stable and LST(Liquidity Staking Assets) pools, an interest rate model is introduced that aligns with the characteristics of 1) pegging and 2) a lower farming APY compared to volatile pools. This interest model functions similarly to a fixed borrowing rate mechanism before it hits a utilization threshold.

{% hint style="info" %}
It's important to note that the 5% fixed borrowing rate in the chart below is not a static figure but rather subject to market conditions and borrowing demand. The parameter will be regularly reviewed and updated under a governance procedure.
{% endhint %}

<figure><img src="https://3038127767-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FHdS59PJdwI8kEK3vLZuH%2Fuploads%2F6Fuhp3RMv0pGqWxRxMrp%2Fimage.png?alt=media&#x26;token=280534db-4d83-4fd3-9e4e-2d92d8032164" alt=""><figcaption><p>Borrowing APY for Stable &#x26; LST Pools</p></figcaption></figure>

Read more about the interest rate model here:

{% content-ref url="pseudo-fixed-interest-rate-model" %}
[pseudo-fixed-interest-rate-model](https://docs.extrafi.io/extra_finance/lending/pseudo-fixed-interest-rate-model)
{% endcontent-ref %}