Interest Rate Model

Autara supports two interest rate model (IRM) types, giving market creators significant flexibility in shaping borrowing incentives and managing liquidity risk.

IRMs determine borrowing and lending rates based on the current state of a vault. Models use utilization, the ratio of borrowed to supplied assets as a key input, ensuring that higher utilization leads to higher interest rates. Each market can also define a minimum borrow APY and a maximum borrow APY, which serve as hard boundaries for interest rate fluctuations.

Poly-linear IRM

The protocol supports multi-point interest rate curves, allowing for advanced configurations such as the commonly used three-point model with custom breakpoints.

Autara supports multi-point curves with multiple breakpoints, enabling precise control over how interest rates scale across utilization bands. This allows for more granular tuning compared to traditional three-point curve models.

Reactive Rate IRM

The reactive-rate IRM dynamically adjusts the borrow APR over time based on utilization trends rather than a static snapshot.

When utilization stays above a defined target, the rate incrementally increases block by block until utilization falls, either through borrower repayment or new deposits. Conversely, when utilization is below the target, the rate gradually decreases, lowering yields to incentivize borrowing. This model enables markets to naturally converge toward an equilibrium utilization, promoting long-term rate stability without manual intervention.