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# Interest Rates

Interest Rates are determined by supply and demand. More specifically, by the ratio of the supply of NFTs in the Unreserved section of the
🔓
MarketVault to the demand for
🖼
NFT Index Token by
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Borrowers collateralizing loans with NFTs.

## Utilization Rate

Utilization Rate U of the MarketVault m is measured via the amount of borrowed
🖼
NFT Index Token b over the total circulating supply of $NFT c, denoted as: $\large{U}_m = {\frac {\textbf{\NFT}_{b}} {\textbf{\NFT}_{c}}} \\[.2in] \small \textbf{\small U}_m = \text{\small Utilization Rate} \;\;\;\;\;\;\;\;\;\; \textbf{\small \NFT}_{b} = \text{\small Borrowed \NFT} \;\;\;\;\;\;\;\;\;\; \textbf{\small \NFT}_{c} = \text{\small Circulating \NFT Supply}$ ## Borrow and Stake Rates The Borrow Rate corresponding to each value of $U_m$ is defined by a piecewise linear function whose slopes and intercepts can be modified by the DAO. $\small \text{BorrowRate} = \begin{cases} .03625U_m + 0.1\% &\text{if } 0 The Staking Reward is determined by the proportion of circulating 🖼 NFT Index Token staked, the Borrow Rate, the Utilization Rate of the 🔓 MarketVault, and the amount held back by the protocol as reserves: $\text{Staking Reward} = {\frac{\text{\small Borrow Rate} \cdot \textbf{\small U}_m -{\text Reserve}}{\text{\small Stake Rate}}} \\[.4in] \small\NFT_{s} = \text{Staked \NFT} \;\;\;\;\;\;\;\;\;\; \text{StakeRate} = {\frac {\NFT_s}{\NFT_c}} \;\;\;\;\;\;\;\;\;\; \text{Reserve} = \text{BorrowRate} * \text{Spread} * U_m$ ## Spreads The reserve that is held back by the protocol, which is a spread between the stake and borrow rate, is distributed between staked$FUNG holders and staked
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NFT Index Token, with ten percent (10%) going to staked $FUNG holders and ninety percent (90%) going to staked$NFT holders.