> ## Documentation Index
> Fetch the complete documentation index at: https://docs.denar.markets/llms.txt
> Use this file to discover all available pages before exploring further.

# Interest & fees

> How Denar's adaptive interest rates work, where the yield flows, and every fee in the protocol — including the hard caps nobody can exceed.

## How interest rates are set

Every market prices borrowing with an **adaptive rate model**. It has no fixed rate table; instead it continuously steers each market toward a target utilization of about **90%**:

* Utilization **above** target → the rate ratchets up, nudging borrowers to repay and lenders to enter.
* Utilization **below** target → the rate drifts down, making borrowing more attractive.

Rates therefore reflect real supply and demand in each isolated market, not a protocol-wide average. Interest accrues continuously into borrower debt, block by block.

## Where a paid dollar of interest goes

```mermaid theme={"system"}
flowchart LR
    B[Borrower pays interest] --> S[90% to lenders]
    B --> P[10% protocol fee]
    S --> V[Vault depositors & direct lenders,<br/>pro rata]
```

## Every fee in the protocol

| Fee                       | Current value                | Hard cap                             | Notes                                                                                       |
| ------------------------- | ---------------------------- | ------------------------------------ | ------------------------------------------------------------------------------------------- |
| Protocol fee on interest  | **10%**                      | 25% — enforced by the immutable core | Applies identically to vault and direct lenders                                             |
| Vault performance fee     | **0%**                       | 50% — enforced by the vault contract | Not currently charged                                                                       |
| Deposit / withdrawal fees | None                         | —                                    | No entry, exit, or management fees anywhere                                                 |
| Borrow origination fee    | None                         | —                                    | You pay only the accruing rate                                                              |
| Liquidation bonus         | ≈ 12.7% stocks / ≈ 7.4% ETFs | Formula-fixed per market             | Paid by the liquidated borrower's collateral to whoever liquidates — not a protocol revenue |

Two properties worth underlining:

* **Fees only ever touch interest, never principal.** There is no mechanism by which any fee reaches deposited collateral or lent capital.
* **The caps are not policy — they're code.** The 25% and 50% ceilings live in immutable contracts; no admin action can exceed them.

<Note>
  Fee changes are an admin power with public on-chain visibility. What the admin can and cannot change — and the timelock protecting depositors — is documented in [Governance & admin powers](/protocol/governance).
</Note>