Interest Rates
Interest Rates are set by market conditions and influenced by the PID Controller.
PID Controller
Neptune uses a PID Controller to tune market efficiency.
The PID controller adjusts borrow rates at set intervals to help the market approach its Target Setpoint. This interest rate model helps Neptune compete by better matching supply to demand through dynamic reactions to current market usage.
Target Setpoint
The Target Setpoint is the desired utilisation for each market to perform best for both lenders and borrowers. The PID target setpoint gradually influences the borrow rate when the market is near its target and more radically adjusts when further from its target.
Utilisation
Utilisation is a measure of borrowed capital to lent capital. For example, a market with $100m lent and $50m borrowed has a market utilisation ratio of 0.5 or 50%.
Current Utilisation is below Target Setpoint so the PID controller drops borrow rates to attract borrowers
Current Utilisation is above Target Setpoint so the PID controller increases borrow rates to balance the market