At Scallop, interest rates for borrowing are determined by static linear (or piecewise linear) models. In a general sense, as the demand for borrowing rises or the supply diminishes, interest rates experience an upward trend. Conversely, when the supply increases or the demand for borrowing declines, interest rates decrease accordingly.
The smart contracts on Sui are upgradeable, and the Scallop Protocol encompasses interest rate models, liquidation parameters, oracle integrations, and asset pools. These components undergo periodic upgrades and adjustments based on market conditions, strategic considerations, and protocol optimizations. As the governance infrastructure on the Sui chain matures, the governance authority will be gradually transitioned to the community through decentralized governance using tokens.