Borrowing maths

Interest Rate & Lending Mechanics (pawUSDC)

Dynamic Borrowing Rates

Meow Finance implements a dynamic interest rate model based on the utilization ratio of pawUSDC.

• Utilization Spike Threshold: Interest rates dynamically scale once utilization > 80%.

• Base Borrowing Rate: 10% APY

• Borrowing Interest Formula:

Borrowing Interest Formula:

Borrowing APY = Vault Yield (APY) / 3

Borrowing interest is calculated per vault based on the yield it's generating.

• LTV (Loan-to-Value): 70% (default, configurable per vault)

• Liquidation Threshold: 71% LTV (configurable per vault)

Token Mechanics – pawUSDC

When users deposit USDC into the lending vault, they receive pawUSDC — our DeFi native LST of USDC representing their share of the pool. This token acts as a receipt and is needed to withdraw USDC plus interest.

The pawUSDC is optimized for yield-bearing vaults.

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Example

User A deposits: $100 in an NFT Time-lock Vault generating 50% APY. Borrowed: $60 against their vault position (60% LTV).

Borrowing Interest APY:

50 (Vault Yield) / 3 = 16.66% ( Borrowing APY )

Distribution of Borrowing Interest:

• 70% → pawUSDC = ~11.66%

• 15% → Meow Finance = ~2.5%

• 15% → Back to the Vault = ~2.5%

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Liquidation Fees

If User A reaches 71% LTV, the vault initiates liquidation. Let's assume liquidation leaves 30% margin.

Liquidation Fee Distribution (of the 30% recovered):

• 70% → pawUSDC = 18%

• 15% → Vault = 6%

• 15% → Meow Finance = 6%

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💸 Fee Breakdown

Source	Distribution
Borrowing Interest	70% pawUSDC, 15% Meow, 15% Vault
Liquidation Margin	60% pawUSDC 20% Meow, 20% Vault

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🔁 Vault Behavior Summary

• USDC deposited into vault earns points + yield

• Lenders receive pawUSDC the DeFi native LST of USDC representing their share

• Borrowers pay dynamic interest based on vault performance

• Liquidations redistribute leftover collateral to pawUSDC, vaults, and Meow Finance

• pawUSDC required to withdraw deposited USDC + earned yield

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