Interest Strategy

Overview

The Interest Strategy Contract in Soul Protocol is responsible for implementing the calculation of interest rates, managing interactions with base protocols, and ensuring efficient borrowing and lending mechanics. It acts as middleware between the SToken contract and the underlying base protocols like Aave or Compound, abstracting the complexities of their specific implementations.

The contract dynamically adjusts interest rates based on market conditions, ensuring they mirror those of the base protocol. However, at high utilization rates, the Soul Interest Strategy may modify rates, temporarily depegging them from the base protocol to incentivize supply and loan repayments.

Key Features

• Under normal conditions, Soul's rates mirror those of the corresponding base protocol.
• When utilization in Soul rises and approaches its borrow limit in the base protocol, supply and borrow rates increase relative to the base protocol to incentivize supplying and repaying.
• An extra borrow rate is applied using a multi-slope model:
  • Zero extra rate when utilization is below the OPTIMAL_USAGE_RATIO (typically 80%).
  • A first slope between OPTIMAL_USAGE_RATIO and LIMIT_USAGE_RATIO (typically 90%).
  • A steeper slope beyond the LIMIT_USAGE_RATIO.
• This mechanism ensures predictable rate adjustments while adapting to market shifts and preventing Soul from reaching 100% utilization in the base protocol.

• Facilitates seamless interactions between Soul's SToken contracts and base protocols.
• Handles operations such as supply, borrow, repay, and redeem on the base protocols.

• Maintains consistent logic across various money markets within the same base protocol.
• Supports deploying tailored strategies for specific markets if required.
• Disables borrow and redeem operations when utilization exceeds the LIMIT_USAGE_RATIO to prevent Soul from being liquidated in the base protocol.

Example Scenario

A user supplies assets into a money market, causing the utilization ratio to exceed the OPTIMAL_USAGE_RATIO. As the ratio increases, the borrow rate climbs due to the no-zero slope, incentivizing users to supply more or reduce borrowing.

By monitoring these dynamics, users can align their strategies with favorable market conditions, either locking in lower rates when borrowing or supplying assets when demand (and rates) are high.

Upgradeability Note

• Delegate Calls: The contract uses delegatecall for interactions, allowing seamless upgrades without reinitializing storage.