Borrow Interest

Borrow interest is the hourly cost of using USDC credit from Notional’s shared liquidity pool. It is separate from perp funding, and every borrower pays the same protocol-wide APR for a given hour. Notional currently prices borrow interest from effective pool utilization only. It does not apply a per-market skew component or per-user collateral risk multiplier.

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Effective Utilization

The base pool utilization is: $$U_{\text{pool}} = \frac{B_{\text{pool}}}{A_{\text{pool}}}$$ where:

• $B_{\text{pool}}$ is total borrowed USDC
• $A_{\text{pool}}$ is effective pool assets

Effective pool assets include supplier interest that has been earned but not yet applied to individual account balances: $$A_{\text{pool}} = A_{\text{stored}} + \text{unapplied supplier interest}$$ Notional can also apply a fresh exchange-risk overlay: $$U_{\text{effective}} = \max(U_{\text{pool}}, U_{\text{exchange}})$$ where $U_{\text{exchange}}$ is exchange margin used by the protocol account divided by effective pool assets. If the exchange-risk reading is missing or stale, this overlay is ignored and treated as zero. Settlement caps the utilization input just below the hard cap: $$U = \min(U_{\text{effective}}, 0.8 - 0.0001)$$

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Borrow APR

Borrow APR is: $$r_{\text{borrow}} = \min(4\% + P(U), 60\%)$$ The premium curve is linear in two regions: $$P(U) = \begin{cases} 4\% \cdot \frac{U}{0.65}, & U \le 0.65 \\[8pt] 4\% + 346.7\% \cdot (U - 0.65), & U > 0.65 \end{cases}$$ The premium calculation is capped at 80% utilization, and total borrow APR is capped at 60%.

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Hourly Settlement

Borrow interest settles at the top of every hour, XX:00:00 UTC. The hourly rate is: $$r_{1h} = \frac{r_{\text{borrow}}}{365 \cdot 24}$$ For each active borrower, Notional computes total debt as: $$D_i = D^{\text{realized}}_i + D^{\text{margin}}_i$$ Realized debt tracks USDC liabilities from items such as fees, funding payments, and realized losses. Margin-financing debt is the USDC required to support open perp positions and exposure-increasing open orders after accounting for the user’s eligible USDC balance. The hourly interest charge is: $$\Delta_i = D_i \cdot r_{1h}$$ Each borrower charge is rounded to 8 decimal places before being applied to the borrower’s USDC balance.

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Supplier Accrual

Borrower interest is distributed pro rata across eligible liquidity providers through a shared accrual index rather than by directly crediting each supplier account during the hourly settlement. The per-hour supplier accrual factor is: $$a_{1h} = \frac{\sum_i \Delta_i^{\mathrm{8dp}}}{E_{\text{suppliers}}}$$ where $E_{\text{suppliers}}$ is the eligible supplier base at settlement time. Supplier accounts realize their accrued USDC when their balance is next updated. If borrowers pay interest but there is no eligible supplier base, the supplier-side interest is routed to treasury instead of being dropped.

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Displayed Earn Rate

The live earn summary uses the same borrow APR and effective utilization, but expresses the supplier-side rate against available liquidity: $$\text{Supplier APR} = \frac{B_{\text{pool}} \cdot r_{\text{borrow}}}{A_{\text{pool}} - B_{\text{pool}}}$$ If there is no borrowed USDC or no available liquidity, the displayed supplier APR is zero.