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description: LENX Lend V1 Interest Rate Calculation
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# Interest Rate

The Variable Rate Interest Rate is a dynamic model that calculates current interest rates using a linear rate, and then modifies the "kink" based on market conditions over time. This model includes a built-in mechanism to adjust rates as the amount of utilized lending capital changes.

When the level of borrowed capital is low, the model decreases the key rate parameters to stimulate borrowing and reduce capital influx, aiming to balance the lending activity. Conversely, when there's a high demand for borrowed capital, the model increases these rate parameters to encourage additional lending and temper borrowing, maintaining equilibrium.

The model's responsiveness is governed by two factors: utilization percentage and a predefined time period known as the half-life. For example, with no borrowing activity, the key rate parameters are reduced by 50% at each half-life interval. If borrowing is at full capacity, the parameters will double with each half-life.

This implies that interest rates will quickly adapt to shifts in borrowing and lending activity following a straightforward path, and simultaneously, they will recalibrate to align with broader market trends by modifying the gradient of this path over an extended period.
