Withdrawal Limitation

To mitigate liquidation risks triggered by borrowers withdrawing their assets, Woodrip enforces a collateral rate of above 120% post-withdrawal, unless the borrowers repay their outstanding borrowings.

Interest Rate Model

In Woodrip, asset money market, the interest rate is automatically balanced based on the asset supply relationship or funding utilization rate. This obviates the need for suppliers and borrowers to negotiate terms and interest rates individually, as the Woodrip Protocol implements an interest rate model. Each money market has independent interest rates. The utilization rate U for each money market unifies the asset supply and demand relationship into one variable:

U_a = Borrows_a / (Borrows_a + Cash_a)

Here, Borrows_a represents the outstanding loan balance in the money market a, and Cash_a signifies the balance of assets supplied to the money market a. Following economic principles, low borrowing demand should result in low-interest rates and vice versa. Borrowing demand is reflected by the utilization rate function. The current set borrowing interest rate is obtained from the utilization rate and a base interest rate of 0.005:

BorrowInterestRate_a = U_a * 0.005

Within one money market, there is the following interest rate equilibrium:

SupplyInterestRate_a = U_a * BorrowInterestRate_a

The figure below illustrates the change in the interest rate influenced by the utilization rate. When the fund utilization rate is 0, the borrowing rate is 0.005 and the deposit rate is 0: