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 $NFT c, denoted as:
Um=$NFTb$NFTcUm=Utilization Rate                    $NFTb=Borrowed $NFT                    $NFTc=Circulating $NFT Supply\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
is defined by a piecewise linear function whose slopes and intercepts can be modified by the DAO.
BorrowRate={.03625Um+0.1%if 0<U<0.81.1Um85%if 0.8<=U<1.0\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:
Staking Reward=Borrow RateUmReserveStake Rate$NFTs=Staked $NFT                    StakeRate=$NFTs$NFTc                    Reserve=BorrowRateSpreadUm\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


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.