Hard Protocol Interest Rate Update
Expanding the functionality and safety of Hard Protocol.
Update: Kava Labs launched a rebranded product portfolio in late August 2021, and the following archived article contains outdated information. Application rebrands on the Kava Platform are as follows: Kava CDP is now Kava Mint; Hard is now Kava Lend; Swap is now Kava Swap. To learn more about the rebrand, please read the announcement.
On May 4th, 2021, a committee proposal was made to adjust the interest rate model for money markets in Hard Protocol. This proposal will increase the interest rate (or Borrow APY) for borrowing an asset when more than 80% of the limit is utilized. This change will impact users who have borrowed BUSD. This update is a step toward extending borrowing to other assets on Hard Protocol.
Since the launch of Hard V2, there has been increasing demand from users to borrow BUSD. After increasing the borrow limit of BUSD from 2 million to 5 million, current utilization in BUSD is still at about 95% of that limit. The goal of this interest rate adjustment is to make it more expensive to borrow if utilization is near 100%. Also, this change is necessary because liquidations can only occur if utilization is below 100%. Borrow APY rates for assets with less than 80% utilization will remain unchanged.
The interest rate model will be adjusted to increase Borrow APY by 5 percent for every 1 percent increase in utilization. As Borrow APY increases, so does the Supply APY. This incentivizes users to supply more of that asset which will in turn reduce the utilization and lower the Borrow APY.
Borrow Limit Utilization * Borrow APY = Supply APY
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