Definition
The borrowing rate is a metric that shows how much interest is charged for borrowing crypto assets on a decentralized finance platform. It represents the ongoing cost of holding a borrowed position and is typically quoted as a percentage. This rate can change over time based on supply and demand for the asset being borrowed. It helps users understand how expensive it is to maintain debt in a given market.
Borrowing rate figures are often presented in formats such as Borrow APY or Borrow APR, which indicate how the cost scales over a year. While the borrowing rate focuses on the cost side for borrowers, it is closely linked to what lenders or liquidity providers earn on the same platform. As a basic pricing signal, it reflects the current conditions of the lending and borrowing market for a specific token.
Context and Usage
In DeFi, the borrowing rate is a core parameter used to describe the terms of a lending market for each supported asset. Platforms typically display this metric alongside related figures like Borrow APY and Borrow APR so users can see both the instantaneous rate and its annualized form. The borrowing rate may update frequently as on-chain activity changes the pool of supplied and borrowed assets.
This metric is used to compare the relative cost of borrowing different tokens within the same protocol or across multiple platforms. It also serves as a reference point for assessing how attractive a borrowing opportunity is compared with other financial options. Because it is a live market-driven number, the borrowing rate provides a snapshot of current demand for leverage and liquidity in a specific asset.