Introducing Algorithmic Borrow RatesLast Updated: March 31, 2019
Now borrow on Nuo Network for as low as 2% APR.
Borrowing on Nuo Network is now algorithmic based on available reserves on the platform. Previously, borrow rates were constant across tokens and would only change based on loan duration. This changes now.
Every token will now have its own borrowing rate based on available reserves which will have a huge positive impact across the network.
Nuo Network is a global debt marketplace for lenders and borrowers. A marketplace thrives if both the sides can co-exist and benefit each other in a fair and transparent way. Algorithmic borrow rates will make the marketplace more dynamic and automatically respond to changes across the network based on user activity on the platform.
With algorithmic interest rates, tokens with abundant supply will have very low borrow rates which will enable more borrowing from the token pool. With more borrowing, the interest rates will rise again, which will attract more lenders to lend on the platform and so on. This modal will ensure, both lenders and borrowers, are incentivised at all times to participate in the network.
Example: Currently, there are $230K worth ETH in the token pool of which only $27K have been loaned out. At the current reserve utilisation of 11.7%, ETH borrow rate will now become 5.28%
One of our major goals with this change is to ensure enough availability of token reserves at all times, to enable reserve withdrawals. We are particularly facing this challenge for DAI token pool which has near ~100% reserve utilisation. Going forward borrow rates for DAI will be quite high which should reduce reserve utilisation and automatically make more reserves available for withdrawal.
Example: Currently, there are $215K worth DAI in the token pool of which ~99% have been loaned out. The DAI borrow rate will now become 49.32%
We are excited to see how these changes affect the lending and borrowing activity on the platform in the next few weeks. We will be analysing the data on Nuoscan and will try to understand the new dynamics this kind of gamification brings to the network. We are open to feedback and suggestions to improve this further and we expect there will be changes to this modal in the coming weeks as we find the right fit.