Yield Curve

The protocol currently uses a piecewise linear curve to let the market determine the current fixed rate yield. The market demand/supply is indicated by the ratio between Total Yield and Idle Yield (see Yield Manager).

At any point in time, Total Yield is tracked by

Total Yield = Idle Yield + Locked Yield

The best of the fixed term yield the protocol can offer, is the current yield. The worst the protocol can offer is 0 yield.

Now let's consider the boundary case. When Idle Yield / Total Yield = 1, this means all yield is idle, i.e. there are a lot of LP2 (supply) but no LP1 (demand). In this case, new LP1 should get a good deal, so the right end of the curve is at the current yield.

On the other end, when hen Idle Yield / Total Yield = 0, this means no yield is idle, i.e there are a lot of LP1 already (insufficient supply for the demand). In this case, new LP1 should shouldn't get a good deal, so the left end of the curve is at 0.

The curve in between is trying to let the market (demand vs supply) converges to a fixed yield rate.