# Interest-Rate Model

### Dynamic Interest Rate Protocol

Every market on Sendit is composed of the same interest-rate model. Sendit's interest rates are not static; they are algorithmically determined by an asset's utilization rate - the percentage of total supplied capital that is actively being borrowed.

This rate serves as a real-time indicator of market liquidity. A low utilization rate corresponds to low interest rates, reflecting a surplus of capital. Conversely, as utilization climbs, the protocol automatically increases interest rates. This mechanism dynamically balances the market by incentivizing deposits (supply) and disincentivizing borrowing (demand).

### Liquidity Safeguards

A lending protocol's primary risk is illiquidity, which occurs if utilization reaches 100%. To prevent this scenario, we employ a kinked interest rate model.

This model is defined by two slopes. After utilization surpasses an optimal target level (the "kink"), the interest rate slope increases dramatically. This ensures that the cost of borrowing becomes prohibitively expensive at very high utilization levels, protecting a buffer of liquidity for depositors. 

### Interest Rate Curve

<figure><img src="/files/SjGliiEpFsJFg439FfmL" alt=""><figcaption></figcaption></figure>


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