# Setting Backstop Take Rate

Last updated

Last updated

The Backstop Take Rate is the percent of the interest paid by pool borrowers sent to the pool's backstop module depositors. The level it's set at influences the proportion of capital you can expect the backstop module to have in relation to the pool. This correlation results from a higher backstop take rate making depositing in the backstop module more profitable. Here are example backstop take rates for pools of various risk levels using the following formula:

$BackstopInterestRequirement = RequiredTVLCoverage*RequiredInterestMultiple$ $BackstopTakeRate = \frac{BackstopInterestRequirement}{(1+BackstopInterestRequirement)}$

Low-Risk Pools

Assumptions:

Need 2% of TVL covered

Backstop depositors demand a rate of 2.5x the lender's rate

Required take rate of 4.75%

Compound V3 would be considered a low-risk pool

Medium Risk Pools

Assumptions:

7.5% of TVL covered

Backstop depositors demand a rate of 4x the lender's rate

Required take rate of 23.508%

Aave V2 would be considered a medium-risk pool

High-Risk Pools

Assumptions:

15% of TVL Covered

Backstop depositors demand a rate of 5x lender's rate

Required take rate of 42.86%

Most pools with Stellar native tokens should be considered high risk