# Yupana Interest Rate

The interest rate strategy in the Yupana protocol is designed to manage risk and regulate supply and demand. Interest rates on loans are determined by the Utilization Rate.

Utilization rate — The amount of loan that has been taken by the users of the lending protocol, divided by the total amount of loan available.

Yupana interest rates work according to the jump rate model. This means that interest change significantly when the utilization rate is changed.

Mathematically, jump interest rates can be characterized as follows:

$i_b =\begin{cases}
\alpha + \beta U & \text{if } U \leq U^*\\
\alpha + \beta U^* + \gamma (U-U^*) & \text{if } U > U^*
\end{cases}$

where 𝛼 denotes a per-block base rate, 𝛽 denotes a per-block multiplier, 𝑈 denotes the utilization ratio (with 𝑈 ∗ denoting the optimal utilization ratio) and 𝛾 denotes a ‘jump’ multiplier.

Oracles provide smart contracts with data on the prices in USD of assets added to the protocol for the formulas to work correctly.

Last modified 1yr ago