Supply Rate

Supply rate is the interest rate earned by depositing assets into a DeFi lending protocol, representing the yield lenders receive for providing capital that borrowers can access. The supply rate derives from borrow rates: when borrowers pay interest, most flows to suppliers, with the protocol taking a small spread. The formula roughly: supply rate = borrow rate × utilization × (1 - protocol fee). If the borrow rate is 10%, utilization is 50%, and the protocol takes 10%, suppliers earn approximately 4.5%. Supply rates fluctuate with utilization because they depend on both the borrow rate (which rises with utilization) and the percentage of capital actually borrowed (utilization itself). A pool with high rates but low utilization might offer lower effective yields than moderate rates with high utilization. Comparing supply rates across protocols and assets helps optimize yield, but rates change constantly and past performance doesn't guarantee future returns. Additional token incentives (liquidity mining) often boost effective yields beyond base supply rates, though these incentives typically decline over time. Supply rates in DeFi are generally higher than traditional savings accounts because you bear smart contract risk, oracle risk, and potential illiquidity during high utilization periods.