Delphi Labs is proud to present a Dynamic Interest Rate Model based on Control Theory.

Lending protocols within DeFi predominantly use fixed interest rate models to price loans. While these models have proved useful and were a clever initial approach to the pricing problem, they have some limitations. Specifically, they can be too rigid for the constantly evolving crypto market and cannot swiftly adjust to changes in external market conditions. In this piece, we explore an alternative pricing solution based on control theory which we believe to be more capital efficient and better suited to the dynamic crypto market.

If you’re a DeFi builder or part of a protocol and are interested in experimenting with this model, please reach out to us; we want to hear from you!

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