# Interest Rate Model

The Open protocol uses a dynamic interest rate model that ensures that the interest offered to the liquidity providers is always lower than the interest gained from the borrowers. The variability between the interest rates of the borrowers and the liquidity providers ensures that the protocol is always profitable and can pay the liquidity providers on time.

Hashstack has made the following considerations while designing the Interest rate algorithm of the Open protocol -

Providing stable returns

Promoting even-play among lenders and borrowers.

The interest rate truly reflects the supply and demand of the underlying asset.

The interest rate model depends on reserves utilization factor and is designed to be in 3 parts:

Where,

(Other variables defined above)

#### Example Math

Assume the following parameters:

**Utilization: 10%**

**Utilization: 90%**

**Utilization: 95%**

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