📈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 🙋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.

$$\small \text{BorrowRate} = \begin{cases} .03625U_m + 0.1\% &\text{if } 0<U<0.8 \\ 1.1U_m - 85\% &\text{if } 0.8 <= U < 1.0 \\ \end{cases}$$

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 🖼️NFT Index Token, with ten percent (10%) going to staked $FUNG holders and ninety percent (90%) going to staked $NFT holders.