Interest Rates
AlphaFi Lend uses dynamic interest rates that automatically adjust based on market conditions. This ensures efficient capital allocation and maintains healthy liquidity levels.
How Interest Rates Work
Interest rates are determined by utilization—the ratio of borrowed assets to supplied assets.
Utilization Rate = Total Borrowed / Total Supplied
*Paste Utilization Rate Image here
When utilization is:
Low — Plenty of liquidity available, rates are low
High — Liquidity is scarce, rates increase to attract suppliers and encourage repayment
This creates a self-balancing system where rates naturally respond to supply and demand.
The Two-Kink Interest Rate Model
AlphaFi Lend uses an interest rate model with two kinks (inflection points). This creates three distinct rate zones:
Zone 1: Low Utilization
When utilization is below the first kink, rates increase gradually. This zone represents normal market conditions with ample liquidity.
Zone 2: Moderate Utilization
Between the first and second kink, rates increase more steeply. This signals that liquidity is becoming constrained and incentivizes action.
Zone 3: High Utilization
Above the second kink, rates spike sharply. This aggressive increase:
Strongly discourages additional borrowing
Incentivizes rapid repayment
Attracts new suppliers with high yields
Why two kinks instead of one?
A two-kink model provides more granular control:
The first kink provides an early warning as utilization rises
The second kink triggers emergency-level rates
This graduated response is more capital efficient than a single sharp transition
It balances capital efficiency during normal conditions with strong protection during stress.
Visualizing the Rate Curve
Each asset's detail page displays the Interest Rate Model chart:
X-axis — Utilization rate (0% to 100%)
Y-axis — Interest rate (APR)
Current position — Marked on the curve showing current utilization
Optimal range — The target utilization zone
You can see how rates would change if utilization increases or decreases.
Supply APR vs Borrow APR
Borrow APR is the rate borrowers pay on their loans.
Supply APR is the rate suppliers earn, calculated as:
Supply APR = Borrow APR × Utilization × (1 - Reserve Factor)
Key relationships:
Supply APR is always lower than Borrow APR
Higher utilization means suppliers earn more (closer to borrow rate)
The reserve factor takes a portion for protocol reserves
Example: Rate calculation
If an asset has:
Borrow APR: 5%
Utilization: 60%
Reserve Factor: 15%
Supply APR = 5% × 60% × (1 - 15%) = 2.55%
Suppliers earn 2.55% while borrowers pay 5%.
Spread Fee
The spread fee (typically 15-25%) represents the margin between what borrowers pay and what suppliers receive. This covers:
Protocol reserves for safety
Operational sustainability
Buffer against bad debt
Rate Dynamics in Practice
When rates increase:
More users borrowing an asset
Suppliers withdrawing liquidity
Market demand for the asset rising
When rates decrease:
Borrowers repaying loans
New suppliers adding liquidity
Reduced demand for borrowing
Checking Current Rates
On the Markets Table
Supply APR — What you earn by supplying
Borrow APR — What you pay to borrow
Fire icon indicates additional incentive rewards
On the Asset Detail Page
Historical APR charts (1W, 1M, 6M, 1Y views)
Current utilization rate
Full interest rate model visualization
Rate parameters and configuration
APR vs APY
AlphaFi displays rates as APR (Annual Percentage Rate), which does not account for compounding.
Since interest accrues continuously:
Actual returns/costs may be slightly higher than displayed APR
The difference is minimal for typical rate levels
APR provides a clearer, more comparable metric
Incentive Rewards
Some assets offer additional rewards beyond base interest rates. These appear as boosted APRs with a 🔥 icon.
To see the breakdown:
Hover over the APR display
View base rate vs incentive rewards separately
Incentive programs may change over time based on protocol priorities and governance decisions.
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