Variable Lending Model

Definition ∞ A variable lending model adjusts interest rates based on real-time market conditions, supply, and demand for specific digital assets. This dynamic approach allows lending protocols to respond to market volatility and liquidity fluctuations. It provides flexibility for both borrowers and lenders, reflecting the current economic climate of the decentralized finance ecosystem. Such models aim to optimize capital allocation and risk management.
Context ∞ Variable lending models are a standard feature in decentralized finance (DeFi) protocols, often discussed in news concerning yield strategies and market dynamics. Reports frequently analyze how changes in these variable rates impact borrowing costs and lending returns across different platforms. Their responsiveness to market shifts is a key aspect of DeFi’s economic structure.