Yields & Returns

Interest Rate

Percentage cost to borrow or return earned from lending capital

Definition

Interest Rate means percentage cost to borrow or return earned from lending capital. In DeFi, the concept matters because it affects risk, return, liquidity, governance, or execution assumptions.

Example

If a lending market pays 4% annually on USDC deposits, that is the deposit interest rate.

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What to check

Separate sustainable revenue from temporary incentives and ask who pays the yield. The main checks are: Variable rate changes; Utilization spikes; Borrow liquidation risk.

Risks to Consider

  • Variable rate changes
  • Utilization spikes
  • Borrow liquidation risk

Common Questions

What does Interest Rate mean in DeFi?

Interest Rate means percentage cost to borrow or return earned from lending capital.

How is Interest Rate used in practice?

A practical example: If a lending market pays 4% annually on USDC deposits, that is the deposit interest rate.

What should I check before relying on Interest Rate?

Separate sustainable revenue from temporary incentives and ask who pays the yield. The main checks are: Variable rate changes; Utilization spikes; Borrow liquidation risk.

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