All interest rates in BENQI are determined as a function of a metric known as the utilization rate. The interest rates on BENQI are determined by the utilization rate, which is essentially the percentage of total asset borrowed out against the total asset supplied. A high utilization rate indicates that a lot of borrowing has occurred, while a low ratio indicates the opposite.
BENQI's interest rate models dynamically adjusts the interest rates of each asset market depending on the utilization rate. A high ratio would incur higher interest payments from borrowers, and consequently higher interest payments to suppliers, thereby encouraging suppliers to add more assets to the protocol and ensuring healthy levels of available liquidity.
BENQI currently uses the Jump Rate Model, which is more efficient at incentivizing liquidity at higher utilization rate, as illustrated in the following chart: