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What Is the Role of “Utilization Rate” in a Lending Protocol?

Ratio of borrowed to deposited assets; a high rate signals low liquidity and high risk of bank run.
Greeks.Live20.11.25

What Is the Role of “Utilization Rate” in a Lending Protocol?

The utilization rate is the ratio of borrowed assets to the total deposited assets. A low rate means high liquidity for withdrawals.

A high rate means most assets are borrowed, limiting liquidity for depositors. If the rate is too high, it signals a high risk of a bank run, as the protocol may not be able to meet withdrawal demands.

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