Introduction to Konomi Lending Parameter Settings
Konomi Lending has been in Alpha testing for a week now and has generated heated discussion within the community. We have been talking to members of the community and found that many of them are eager to create their own lending pools at the end of the Alpha testing. However, they still have a lot of doubts about how to set the parameters in their pools. Hence, we have decided to publish this article to provide more details on how to set the parameters in your pool.
Before setting up the pool’s rate model, Owners should have a basic understanding of the Konomi Lending rate model. Currently, Konomi Lending uses a segmented piecewise linear function model where the Interest Rate will increase at a uniform speed in each segment as the Utilization Ratio increases. This requires users to set the Base Rate Per Year (the base rate when the Utilisation Ratio is 0), Multiplier Per Year (the multiplier when the first segment of the segmentation function grows more slowly), Kink (the turning point of the segmentation function), and Jump Multiplier per year (the multiplier when the second segment grows faster) for each rate model.
Once the basic meaning of these parameters is understood, Owners should pay attention to the level of interest rates and the reliability of the liquidating parameters when setting the utilization rate in the simulated pool at different levels. Competent Owners can simulate these using professional financial simulation software. It is also important to refer to the interest rate settings of other pools within Konomi Lending and other lending software such as Compound and AAVE to determine if the interest rate of the pool you are creating is competitive. Finally, when setting the parameters, as some tokens have high volatility, Owners should consider the risk of extreme market conditions. As much as you can, try to set a large difference between the rate increase before and after Kink and be relatively conservative with the choice of collateral to ensure that the pool does not run out of liquidity in extreme conditions.
The information above is an introduction to the Konomi Lending parameters. We hope to help those in the community who wish to become Owners, and we expect to allow access to the community to become Owners after the Alpha Test.
KONOMI is a decentralised liquidity and money market protocol for cross-chain crypto assets. Using substrate as the development framework, the network aims to provide a money market for assets in the Polkadot ecosystem.
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Official Website: https://www.konomi.network
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