Flexible Borrowing Interest

To support the long-term stability of the Axiom protocol, we’ve introduced variable interest rates for borrowing. Currently, these rates depend on the Total Collateral Ratio (TCR) and the Outstanding Collateral Ratio (OCR), but rest assured, the rates are very low, so there’s no need for concern. For detailed rate strategies, you can refer to the interest rate model.

When you decide to close your vault, the protocol will ensure all your debt, including any unpaid interest, is cleared. Given the flexible borrowing interest rates, users may need to purchase $AXUSD in the market to repay interest, which can create an upward pressure on $AXUSD prices. Consequently, we have implemented the following settings to manage this dynamic:

Whenever a user initiates a new operation in their vault, the contract will automatically collect any previously accrued but unpaid interest. Additionally, we will periodically withdraw protocol revenue from the treasury and sell it on the market to increase the total supply available.

How Can I Take Advantage Of Leverage?

You can take advantage leverage by selling the borrowed $AXUSD on the market for collateral and using that collateral to top up your vault . This allows you to draw and sell more $AXUSD, repeating the process to reach your desired leverage ratio. Assuming perfect price stability (1 $AXUSD = $1), the maximum achievable leverage ratio is 11x, calculated by the formula:

[ \text{Maximum Leverage Ratio} = \frac{\text{MCR}}{\text{MCR} - 100%} ]

where MCR is the Minimum Collateral Ratio.

Why did the collateral and debt of my vault increase without my intervention?

If a vault is liquidated and the balancer Pool is empty (or cleared due to liquidation), the redistribution process kicks in. As a result, each borrower will receive a portion of the liquidated collateral and debt.

Interest Rate Model

We aim to keep the total system collateral ratio within a reasonable range by introducing the Optimal Collateral Ratio (OCR). Normally, the borrowing rate stays very low, but if the system's collateral ratio exceeds the OCR, the rate will increase significantly.

The interest rate ( R_t ) follows this model:

• If ( CCR > TCR ): [ R_t = R_{base} ]

• If ( CCR \le TCR < OCR ): [ R_t = R_{base} + \frac{OCR - CCR}{TCR - CCR} R_{slope1} ]

• If ( OCR \le TCR ): [ R_t = R_{base} + R_{slope1} + \left( \frac{TCR}{OCR} - 1 \right) R_{slope2} ]

In the borrow rate's technical implementation, the calculateCompoundedInterest method uses an approximation that mainly affects high interest rates. Consequently, the actual borrow rate is:

[ \text{Actual APY} = \left( 1 + \frac{\text{Theoretical APY}}{\text{secs per year}} \right)^{\text{secs per year}} - 1 ]

Model Parameters:

• OCR = 200%

• ( R_{base} = 0.5% )

• ( R_{slope1} = 2% )

• ( R_{slope2} = 10% )