Liquidity Risk
Australis is a DeFi lending protocol allowing users to borrow multiple assets from the liquidity pool. Depositors receive astTokens to represent their deposited funds. The liquidity of the protocol is the amount of crypto assets available in the pool for lending, borrowing and other functions we offer, including redeeming astTokens. Lack or insufficiency of liquidity in the protocol will render operations dysfunctional. At any point in time, the liquidity of the protocol can be assessed through the utilization ratio: the share of reserve that is currently borrowed for each currency.
U is an indicator of the availability of capital in the pool. The interest rate model is used to manage liquidity risk through user incentivizes to support liquidity:
- When capital is available: low interest rates to encourage loans.
- When capital is scarce: high interest rates to encourage repayments of loans and additional deposits.
Liquidity risk appears with high utilization, it becomes more problematic as U gets closer to 100%. The interest rate curve is split in two parts around an optimal utilization rate Uoptimal. Before Uoptimal the slope is small, after it starts rising sharply. The interest rate Rt follows the model:
Interest Rate Model
Asset | Uoptimal | Base | Slope 1 | Slope 2 |
|---|---|---|---|---|
DAI | 80% | 0% | 4% | 75% |
USDC | 80% | 0% | 4% | 75% |
USDT | 80% | 0% | 4% | 75% |
ETH | 45% | 0% | 7% | 300% |
WETH | 45% | 0% | 7% | 300% |
WBTC | 45% | 0% | 7% | 300% |
NEAR | 45% | 0% | 7% | 300% |
When market conditions change, risks change, and the interest rate parameters change accordingly.
This section shows Australis's APY per asset. There are only two rate curves:
- Volatile assets such as NEAR, WBTC, WETH, ETH:
Volatile Assets Interest Rate Curve
- Stablecoins such as DAI, USDC, USDT:
Stablecoins Interest Rate Curve
The borrowed interest rates paid are distributed as yield for depositors, save for the part that’s reserved for the ecosystem’s reserve that is defined by the reserve factor. This interest is paid in the same asset as it is lent out then distributed among all the liquidity providers of that same asset. You can view the protocol's deposit APY for each asset on the app’s home page. The average Deposit APY over a period also includes Flash Loan fees.
Last modified 4mo ago