NIL Protocol

Utilization Rate

The utilization rate refers to the total amount of collateral in a Writer Pool that is already matched to active NIL contracts, divided by the total amount of capital in the pool.
The utilization rate represents how much of the Writer Pool capital is actively being used as collateral for open NIL contracts. A higher utilization rate means that Writers will earn higher yield on their deposited collateral.
The utilization rate is an important input into the calculation of the effective funding rates for NIL contracts that are matched to the Writer Pool, similar to how borrow and lend rates are dynamically set by supply and demand on Aave.
The funding rate calculation will initially target a utilization rate of 80% to ensure that the Writer Pool has sufficient liquidity for Writers to withdraw their ownership stakes when they desire to.