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

3. The Kink: A Flexible Threshold

To keep supply and demand in harmony, Comet uses a concept called the “kink.” It’s basically a utilization threshold at which interest rates start to rise faster. The model consists of two linear slopes:

  1. Below the Kink

• Rates increase at a moderate pace as utilization climbs.

• The idea is to gradually incentivize more deposits and discourage excessive borrowing.

  1. Beyond the Kink

• Rates become steeper if utilization passes the kink.

• This rapid increase makes borrowing more expensive, protecting the market from hitting extremely high utilization levels that could push lenders away.

Think of the kink as the “comfort zone” threshold. Once that line is crossed, the protocol reacts more aggressively to prevent the market from running out of liquidity.

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