Dynamic Borrowing Rates

Meow Finance implements a dynamic interest rate model based on the utilization ratio of the USDC lending pool.

• Utilization Spike Threshold: Interest rates dynamically scale once utilization > 80%.

• Base Borrowing Rate: 10% APY

• Borrowing Interest Formula:

  Borrowing Interest Formula:
  
  Borrowing APY = Vault Yield (APY) / 3

Borrowing interest is calculated per vault based on the yield it’s generating.

• LTV (Loan-to-Value): 70% (default, configurable per vault)
• Liquidation Threshold: 71% LTV (configurable per vault)

Token Mechanics – pawUSDC

When users deposit USDC into the lending vault, they receive pawUSDC — our LP token representing their share of the pool. This token acts as a receipt and is needed to withdraw USDC plus interest.

The pawUSDC is optimized for yield-bearing vaults.

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Example

User A deposits: $100 in an NFT Time-lock Vault generating 50% APY.
Borrowed: $60 against their vault position (60% LTV).

Borrowing Interest APY:

50 (Vault Yield) / 3 = 16.66% ( Borrowing APY )

Distribution of Borrowing Interest:

• 70% → Lenders = ~11.66%
• 15% → Meow Finance = ~2.5%
• 15% → Back to the Vault = ~2.5%

Liquidation Fees

If User A reaches 71% LTV, the vault initiates liquidation. Let’s assume liquidation leaves 30% margin.

Liquidation Fee Distribution (of the 30% recovered):

• 70% → Lenders = 18%
• 15% → Vault = 6%
• 15% → Meow Finance = 6%

💸 Fee Breakdown

Source	Distribution
Borrowing Interest	70% Lenders, 15% Meow, 15% Vault
Liquidation Margin	70% Lenders, 15% Meow, 15% Vault

🔁 Vault Behavior Summary

• USDC deposited into vault earns points + yield
• Lenders receive pawUSDC representing their share
• Borrowers pay dynamic interest based on vault performance
• Liquidations redistribute leftover collateral to lenders, vaults, and Meow Finance
• pawUSDC required to withdraw deposited USDC + earned yield