Example

TL;DR of these cases:

1) High Demand/Low Supply -> High Borrow Rate

2) Low Demand/High Supply -> Low Borrow Rate

3) Demand $\approx$ Supply -> Base Borrow Rate

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To better understand the functionality of the Throttle Module, let's consider two scenarios:

1. Scenario 1: High Demand, Low Supply

Let's calculate the New Borrow Rate for the following conditions:

• $ΔB$ (borrow velocity) = 10%

• $ΔS$ (supply velocity) = 2%

• $CR$(critical ratio) = 3

• Base Borrow Rate = 5%

Calculation based on formulas: $New Rate=5\%×(1+0.2×(5−3))+0.05=5.85$

Result: The Borrow Rate increases to curb excessive borrowing.

1. Scenario 2: Balanced Demand and Supply

• $ΔB$ and $ΔS$ are balanced $(ΔB/ΔS = CR)$

Result: No adjustment needed. Rates stay at base levels.