Base Rate

The Base Rate is the minimum interest rate applied to a loan within a decentralized protocol when the utilization ratio is zero or near zero. It serves as the floor for borrowing costs, ensuring that lenders receive a baseline return for providing capital even during periods of low market demand.

This parameter is hardcoded into the protocol and is typically adjusted through governance votes to reflect changing market conditions. By setting a base rate, protocols establish a consistent cost of capital that anchors the entire interest rate curve.

It prevents interest rates from dropping to zero, which would discourage liquidity providers from keeping their assets in the pool. It is the foundation upon which all other rate adjustments are calculated.