> For the complete documentation index, see [llms.txt](https://docs.deltaprime.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.deltaprime.io/liquidity-pools/interest.md).

# Interest

The interest rate tells you how much you pay / receive per year for borrowing / lending out an asset. Lenders benefit from high interest rates, and borrowers benefit from low rates. An efficient system, therefore, has an interest rate both parties accept and that has the lowest possible spread[^1] between both interest parties.

For a protocol like DeltaPrime, fitting interest rates is crucial. In the following pages, we explain how DeltaPrime decides on its interest model and how the interest is calculated.

[^1]: The spread is the difference between the percentage that borrowers pay and depositors receive. This number is dependent on the percentage of deposited funds that is lent out.

    For example: 

    Total deposits: $100

    total borrowed: $50

    Borrowing rate: 100% ($50 per year)   

    Deposit rate: 50% ($50 per year)

    Spread = 50%.

     

    A lower spread leads to higher capital efficiency, and a better overall market for all participants.