Interest Rates

Interest charged to borrowers is based on the following components: 1: Vault Collateralization Rate 2: Peg Rate 3: Debt Cap Rate = 4: Total Interest Rate 1: Vault Collateralization Rate Hyperstable uses Morpho's AdaptiveCurve interest rate model at the vault level, which is engineered to maintain the ratio of the borrowed asset ($USDH) over the supplied asset (Collateral), close to a preselected target. When the (vault specific) Collateral Ratio is above the set target, the interest rate automatically trends towards zero. 2: Peg Rate The purpose of the peg based interest rate is to manage supply and demand for USDH and keep the stablecoin trading at $1. If USDH is trading above $1, the interest rate is lowered. If USDH is trading below $1, the interest rate is raised. Just like the vault collateralization Rate, under normal circumstances (when USDH trading at or above $1, aka at ''peg''), the peg rate trends towards zero.

3: Debt Cap Rate To manage the overall composition of USDH's backing collateral, a % cap is set per collateral vault based on total USDH debt. When the debt of a vault is above the set %, interest rates for that specific vault goes up. When a vaults debt is at the intended % of total debt, the interest rates trend towards zero.

4: Total Interest Rate The total interest charged to borrowers is the sum of the above.

Discount on Interest For borrowers, holding vePEG acts a rebate on their interest. Depending on the size of their Interest relative to ownership of vePEG, borrowers can achieve a discount, pay zero interest or even earn while borrowing, as 100% of revenue from interest and liquidation fees flow to PEG lockers.