All pools can choose a pattern between the fixed rate model and the variable rate model. The creators of permissionless pools can choose to be the fixed rate available in the creation process.
This kind of rates act as a fixed rate in the short-term, but can be re-balanced in the long-term in response to changes in the utilization and efficiency of the liquidity. The fixed rate, as its name indicates, will remain pretty stable in a specific lending period.
If a pool chooses to apply the fixed rate model, when the borrowers borrow ETH from the variable-rate pool using NFT as collateral, there is a fixed-time lending period to pay back the ETH. If the borrowers' loan is overdue, the collateralized NFT should be liquidated.
The variable rate will change over time and could be the optimal rate depending on liquidity pools condition.
If a pool chooses to apply the variable rate model, when the borrowers borrow ETH from the variable-rate pool using NFT as collateral, there is no fixed-time lending period to pay back the loan. As long as your position is safe, you can borrow for an undefined period. However, as time passes, the accrued interest will grow to make your health factor decrease, which might result in your deposited NFT becoming more likely to be liquidated.
Last modified 7mo ago