compoundtutorials
  • Chapter 1: Introduction to Compound
    • 1. What Is Compound?
    • 2. Introducing Comet (Compound V3)
    • 3. What’s Next?
  • Chapter 2: Markets, Utilization & Interest Rates
    • 1. What Is a Market in Comet?
    • 2. Utilization: Balancing Supply & Demand
    • 3. The Kink: A Flexible Threshold
    • 4. Interest Rate Parameters
    • 5. Supply and Borrow Interest Rates vs. Utilization Rate Chart
    • 6. Why This Matters
  • Chapter 3: Hands-On Tutorial (Step by Step)
    • 1. Environment Setup
    • 2. Getting Sepolia ETH and WETH
    • 3. Project Structure
    • 4. Creating the index.js Script
    • 5. Run the Script
    • 6. Next Steps
  • Chapter 4: Repaying, Withdrawing & Managing Your Position
    • 1. Updating index.js
    • 2. Example Usage in Your Main Execution
    • 3. Recap
    • 4. Summary & Best Practices
  • Chapter 5: Using the Compound.js SDK
    • Getting Started
    • Performing Common Actions
  • Chapter 6: Additional Resources
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  1. Chapter 2: Markets, Utilization & Interest Rates

2. Utilization: Balancing Supply & Demand

“Utilization” tells us how much of the supplied base asset is currently being borrowed out of the total available. Think of it like this:

• 0% utilization means that no one is borrowing from the pool.

• 100% utilization means everything supplied is currently borrowed, leaving no extra liquidity.

A higher utilization typically means that demand for borrowing is strong, which pushes interest rates upward to encourage more deposits (and possibly curb borrowing). Conversely, low utilization means there’s plenty of liquidity left in the pool, so borrowing becomes less expensive.

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