Setting interest rate

Weekly adjustment of interest rates

The goal of interest rate adjustment is to find a neutral interest rate that balances demand from savers with demand from borrowers. This rate will maximize TVL, the amount of assets placed from savers to borrowers. If the interest rate is too low, then savers will not buy SWEEP, and borrowers will not be able to borrow as much as they want. If the interest rate is too high, then borrowers will not borrow and supply SWEEP, and savers will not be able to save as much as they want.

Sweep adjusts the interest rate once per week. The weekly cycle fits into the workflow of securities traders who may face settlement cycles that are several days long.

Raising the interest rate

Sweep raises the interest rate if the average price of SWEEP < target price. Savers will have an incentive to buy more SWEEP. Borrowers will have an incentive to reduce borrowing (supplying) of SWEEP.

Lowering the interest rate

Sweep lowers the interest rate if the average price of SWEEP > target price. Savers will have an incentive to buy less SWEEP. Borrowers will have an incentive to increase borrowing (supplying) of SWEEP.

Refresh the interest rate

refreshInterestRate will be executed once a week. The interest rate will rise if the average price in the past week was below target, and it will fall if the average price in the last week was above target.

function refreshInterestRate()

Note: the next target price is calculated by:

NTP = p * (1 + r) ^ (t / y)
r: interest rate per year
t: time period to pay the rate
y: time in one year
p: current price