How Is the Interest Rate for a Stablecoin Determined in a Decentralized Lending Pool?

The interest rate is typically determined algorithmically based on the utilization rate of the lending pool. As more stablecoin is borrowed (higher utilization), the interest rate for borrowing increases, incentivizing more suppliers to deposit their stablecoin.

Conversely, a low utilization rate leads to a lower interest rate, encouraging more borrowing.