# Base Rate

### **Borrowing / Repayment Fees**

* (Normal) Borrowing Fees: borrowing\_amount \* (BASE\_RATE + 0.5%) (up to a max of 5%) 
* (Recovery Mode) borrowing Fees: 0%
* Repayment Fees: 0%

For example, when the borrowing fee stands at 1.5% (base rate = 1%), and the borrower wants to borrow 1,000 $USC. The borrower will incur a debt of 1,000 \* (1+1.5%) + 20 = 1,035 $USC after the Borrowing fee and liquidation reserve is added. 

### **Redemption Fees**

* Redemption Fees: redemption\_amount \* (BASE\_RATE + 0.5%) (up to a max of 5%)

\
The Base Rate is the key variable that acts as a soft peg mechanism by encouraging or discouraging the borrowing of $USC. <br>

This Base Rate starts off at 0 but increases with every redemption event:

* Base Rate (t) = Base Rate(t-1) + a \* ($$USC redeemed/$$USC supply), a = 0.5<br>

If redemption demand is high, it likely indicates a high supply of $USC, and that it’s trading below peg. An increase in the Base Rate makes it expensive to borrow more $USC, effectively curbing the supply of new loans. This decrease in $USC supply over time gradually pushes the price back up to peg.<br>

The Base Rate has a decay factor from the time since the last fee event, be it the last borrowing or redemption of $USC. With the current set up, the half life of the Base Rate (time it takes for Base Rate to halve from last event) is half a day:

* Base Rate (t) = Base Rate(last fee event) \* b^(block since last fee event / blocks produced in ½ day), b = 0.5

No fee events likely indicate that fees are too high for both redemptions or borrowing. This decay helps regulate fees when it becomes too exorbitant for market conditions.

{% hint style="info" %}
Notes:

* The redemption fee is charged in the respective collateral currency (e.g. cdcETH).&#x20;
* The borrowing and redemption fee floor is set at 0.5% in Normal Mode. In Recovery Mode, the borrowing fee will be 0%. (more details on Recovery Mode can be found here)
  {% endhint %}


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://doc.orby.network/overview/usduscs-peg-stability-and-redemptions/base-rate.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.