Pseudo-Fixed-Interest-Rate (PFIR) Model

OpenWorld introduces the Pseudo-Fixed-Interest-Rate (PFIR) model, a groundbreaking approach aimed at stabilizing interest rates within the lending and borrowing ecosystem. This model is strategically designed to cater to stable and LST-linked pools, ensuring a consistent and controlled borrowing experience.


Borrowing assets for yield farming can often be complex due to the unpredictable nature of fluctuating interest rates. Particularly for stable and LST-linked pools, maintaining fixed borrowing costs is of paramount importance to enable a predictable and sustainable yield farming strategy.

How PFIR Works

Visualize the PFIR model as a finely tuned mechanism that enhances the yield farming process. It operates akin to a fixed borrowing rate system until it reaches a preset utilization threshold, typically around 80%. Here's how it unfolds:

  • Stable/LST Pools: Below the utilization threshold, users can access stable and LST-linked pools with a fixed borrowing rate intentionally set lower than the farming Annual Percentage Rate (APR).

  • Utilization-Driven Dynamics: As utilization of these pools grows, lenders are rewarded with a competitive lending APR derived from both utilization and borrowing APR. This unique approach ensures lenders experience an impressive APR compared to traditional lending protocols.

  • Balancing Act: Once the utilization threshold is exceeded, the borrowing interest rate undergoes a significant increase. This dual-action mechanism encourages borrowers to repay their loans or motivates lenders to supply additional capital. Simultaneously, it safeguards lenders by allowing them to withdraw their deposits.

OpenWorld prioritizes user interests, preventing leveraged users from unfavorable Annual Percentage Yield (APY) rates due to exorbitant borrowing costs. This safety net caps borrowing at 81% utilization, providing protection for all participants.

The PFIR Model in Action

Please note that the value '5%' mentioned in the chart above as the fixed borrowing rate is subject to market dynamics and borrowing demand. This value will be regularly reviewed and updated through a transparent governance process.

Benefits of the PFIR Model

For Farmers:

  • Cost-Efficiency: Dedicated lending pools for stable/LST pools lead to intentionally lower borrowing costs, fostering an economically efficient yield farming ecosystem.

  • Predictable Earnings: Leverage farming becomes predictable, avoiding negative APRs and uncertainties.

For Lenders:

  • Consistent Gains: Increased utilization triggers an attractive lending APR, ensuring steady returns compared to traditional protocols.

  • Exit Strategy: A well-designed buffer empowers lenders to exit positions at their discretion, providing control and flexibility.

  • Reduced Risk: Offering liquidity in stable or pegged LST pools significantly lowers vulnerability to potential losses from market turbulence, compared to high-volatility pools.

Last updated