Borrowing
Interest rates
You choose your own rate, from 1% to 16% a year. The rate sets what you pay and where you stand when PLMB is redeemed.
Most lending markets set your rate for you from utilization, and change it under you. In Plumb you pick it. There are sixteen rates, one percentage point apart, from 1% to 16% a year. Every trove at the same rate pays the same interest, and each rate holds up to sixteen troves.
The trade
The rate you choose decides two things at once:
- What you pay. Interest accrues every second on your debt at your rate.
- Where you stand in line. Redemptions always take debt from the lowest rate that has any. The more debt sits at rates below yours, the further a redemption has to go before it reaches you.
A low rate is cheap but first in line. A high rate costs more but leaves a long queue of cheaper debt in front of you. The app's Redeemed before you figure is that queue: the PLMB owed at rates lower than the one you are looking at.
Redemptions only pay when PLMB trades below $1 minus the fee. While PLMB holds its peg, nobody has a reason to redeem, and even the lowest rate is left alone. When PLMB slips, the cheapest debt is the first to go.
How interest accrues
Each rate keeps its own running total. When anything touches that rate (a trove opening or changing there, a redemption, a liquidation, a stability-pool deposit or withdrawal, or anyone calling the public accrue instruction), the program settles the interest since the last time:
interest = debt × rate × seconds elapsed ÷ 31,536,000The interest is added to the debt of every trove at that rate in proportion to what each owes, and minted as PLMB: 70% to the stability pool and 30% to the treasury. Rounding remainders are carried forward, so not a single unit is lost or invented between settlements.
Because settled interest is added to debt, it compounds. How often a rate is settled changes your effective cost slightly; it can never exceed continuous compounding, erate − 1. At 5% that is 5.13%, at 16% it is 17.35%.
Changing your rate
You can move your trove to any other rate with a free seat. The move needs a fresh price, because the program checks your trove stays at 150% afterwards.
The first move is free if your trove is older than seven days, and so is any move made seven days or more after the previous one. Moving sooner costs 0.5% of your debt, added to your debt and paid to the treasury. The app shows the fee before you sign.
The fee exists for the redemption line to mean something. Without it, a borrower could sit at 1%, watch PLMB's price, and jump to a higher rate the moment the peg slipped, leaving others to be redeemed in their place.
What a full rate means
Each rate has sixteen seats. When all are taken, the program refuses new troves and rate changes into it, and the app says so on the board. Pick a neighbouring rate; a seat frees up when a trove at that rate closes, moves, or is fully redeemed and withdrawn.
# Interest rates You choose your own rate, from 1% to 16% a year. The rate sets what you pay and where you stand when PLMB is redeemed. Most lending markets set your rate for you from utilization, and change it under you. In Plumb you pick it. There are sixteen rates, one percentage point apart, from 1% to 16% a year. Every trove at the same rate pays the same interest, and each rate holds up to sixteen troves. ## The trade The rate you choose decides two things at once: - **What you pay.** Interest accrues every second on your debt at your rate. - **Where you stand in line.** [Redemptions](/docs/redemptions) always take debt from the lowest rate that has any. The more debt sits at rates below yours, the further a redemption has to go before it reaches you. :::figure strings | Redemptions start at the left. The debt hanging to the left of your line is the debt that gets redeemed before yours. A low rate is cheap but first in line. A high rate costs more but leaves a long queue of cheaper debt in front of you. The app's **Redeemed before you** figure is that queue: the PLMB owed at rates lower than the one you are looking at. Redemptions only pay when PLMB trades below $1 minus the fee. While PLMB holds its peg, nobody has a reason to redeem, and even the lowest rate is left alone. When PLMB slips, the cheapest debt is the first to go. > [!TIP] > There is no right rate, only a choice about risk. A common approach is to sit just above where most of the debt is: you pay a little more than the crowd, and the crowd stands between you and the next redemption. ## How interest accrues Each rate keeps its own running total. When anything touches that rate (a trove opening or changing there, a redemption, a liquidation, a stability-pool deposit or withdrawal, or anyone calling the public `accrue` instruction), the program settles the interest since the last time: ```text interest = debt × rate × seconds elapsed ÷ 31,536,000 ``` The interest is added to the debt of every trove at that rate in proportion to what each owes, and minted as PLMB: 70% to the stability pool and 30% to the treasury. Rounding remainders are carried forward, so not a single unit is lost or invented between settlements. Because settled interest is added to debt, it compounds. How often a rate is settled changes your effective cost slightly; it can never exceed continuous compounding, e<sup>rate</sup> − 1. At 5% that is 5.13%, at 16% it is 17.35%. > [!INFO] > The app shows your debt growing every second, with interest that hasn't been settled yet included. That is the debt the program will charge when your next transaction runs. ## Changing your rate You can move your trove to any other rate with a free seat. The move needs a fresh price, because the program checks your trove stays at 150% afterwards. The first move is free if your trove is older than seven days, and so is any move made seven days or more after the previous one. Moving sooner costs **0.5% of your debt**, added to your debt and paid to the treasury. The app shows the fee before you sign. The fee exists for the redemption line to mean something. Without it, a borrower could sit at 1%, watch PLMB's price, and jump to a higher rate the moment the peg slipped, leaving others to be redeemed in their place. ## What a full rate means Each rate has sixteen seats. When all are taken, the program refuses new troves and rate changes into it, and the app says so on the board. Pick a neighbouring rate; a seat frees up when a trove at that rate closes, moves, or is fully redeemed and withdrawn.