Protocol Parameters

Understanding the fundamental parameters of the NEIQW protocol is essential for effective participation. These parameters include the Collateral Factor, Reserve Factor, Close Factor, and Liquidation Incentive, each playing a critical role in the protocol's financial ecosystem.

Collateral Factor

• Definition: Dictates the maximum loan value against a specific asset.

• Example: For BNB with a collateral factor of 40%, if the price is $100, up to $40 can be borrowed against it.

Reserve Factor

• Purpose: Represents the portion of interest from borrowers that is allocated to NEIQW’s reserves, accessible via governance decisions.

• Example: A 20% reserve factor implies 20% of paid interest on an asset accrues to NEIQW.

Close Factor

• Function: Limits the proportion of a borrower’s total debt that can be liquidated in a single transaction.

• Example: A 50% close factor allows up to 50% of a delinquent account’s borrow to be cleared in one action.

Liquidation Incentive

• Incentive for Liquidators: Provides an extra reward to liquidators for maintaining the protocol's financial health by executing liquidations.

• Example: A 10% liquidation incentive offers liquidators an additional 10% of the borrower’s collateral.

• Seize Share: The protocol retains a 3% share of the liquidated collateral to bolster reserves and reduce the risk of insolvency from potential cascading liquidations.

Interest Rate Models

Interest rates within NEIQW are intricately linked to the utilization rate of assets within the protocol. The utilization rate measures the proportion of borrowed assets against the total supplied, guiding the dynamic adjustment of interest rates:

• High Utilization: Signifies extensive borrowing. High rates at this level incentivize more deposits and maintain liquidity.

• Low Utilization: Indicates minimal borrowing. Lower rates at this stage aim to encourage borrowing.

NEIQW employs the Jump Rate Model, which effectively promotes liquidity management, particularly under conditions of high utilization. This model ensures that as demand for borrowing increases, so does the cost, balancing the supply-demand dynamics efficiently. This approach not only optimizes asset liquidity but also enhances the stability and responsiveness of the market to shifts in borrower activity.