# Interest Rate Models

Base Pool operators have 2 interest rate models to use at their discretion.

## Fixed Rate

Fixed rate models in Sentiment are interest rate models without variability dependent on utilization. These models have a definitive interest rate that is maintained through the duration of loans for all borrowers. While all borrowers will pay the same rate, lenders will only receive the rate as expressed by utilization, this is a common phenomena often referred to as cash drag.

An a example of such would be:

- If a market has a fixed rate of 10% and the utilization is at 50%, lenders can expect to receive 5% interest, since half of their capital is unallocated.

Super Pool allocators can prevent cash drag by optimizing allocation dependent on various market utilizations.

## Dynamic Rate

Dynamic Interest Rate model in Sentiment is one where interest is dependent on utilization. Interest increases as utilization increases as a reaction to the demand for capital, conversely interest decreases as utilization decreases to incentivize borrowers to borrow capital.