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 Borrowers collateralizing loans with NFTs. 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:
The Borrow Rate corresponding to each value of is defined by a piecewise linear function whose slopes and intercepts can be modified by the DAO. 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: 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 NFT Index Token, with ten percent (10%) going to staked $FUNG holders and ninety percent (90%) going to staked $NFT holders.