Dynamic APY & Interest Rates
Cetra utilizes a Variable Interest Rate Model (InterestRateModel.sol) to calculate how much yield suppliers earn and how much interest borrowers pay.
How It Works
Instead of a fixed rate, interest rates change algorithmically based on Pool Utilization.
Utilization is calculated as: Utilization Rate = Total Borrows / (Available Liquidity + Total Borrows)
The Dual-Slope Curve
To protect the protocol's liquidity, Cetra uses a dual-slope interest rate curve:
Under Optimal Utilization: When there is plenty of liquidity in the pool, interest rates increase slowly. This keeps borrowing cheap and encourages users to take out loans.
Above Optimal Utilization: If the pool balance gets too low (meaning almost all funds are borrowed), the interest rate curve "kinks" and spikes sharply. This high interest rate heavily penalizes new borrowing, strongly incentivizes current borrowers to repay their debt, and attracts new suppliers to deposit funds for massive yields.
This self-correcting mechanic ensures that depositors can almost always withdraw their funds because the pool is structurally prevented from being completely drained.
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