> For the complete documentation index, see [llms.txt](https://liquidx-3.gitbook.io/liquidx-whitepaper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://liquidx-3.gitbook.io/liquidx-whitepaper/13.-lending-architecture/13.2-interest-rate-model-algorithmic-and-fair.md).

# 13.2  Interest Rate Model - Algorithmic and Fair

Interest rates in LiquidX are set by an algorithm, not by any person. The key variable is 'utilization rate' - what percentage of the deposited assets are currently being borrowed. Higher utilization means higher demand for borrowing, which triggers higher rates to attract more lenders and moderate borrowing demand.

Here is the table extracted from the image:

| **Utilization Rate**        | **Supply APY (Lenders Earn)** | **Borrow APY (Borrowers Pay)** |
| --------------------------- | ----------------------------- | ------------------------------ |
| 0% – 50% (Low demand)       | 1% – 4% APY                   | 2% – 8% APY                    |
| 50% – 80% (Moderate demand) | 4% – 12% APY                  | 8% – 20% APY                   |
| 80% – 100% (High demand)    | 12% – 30% APY                 | 20% – 50% APY                  |


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