# Hummus Exchange Interest Rate Model

The Interest Rate Model opens new opportunities for Hummus Exchange users to receive more HUM from their staked assets. This upgrade will automate the rebalancing of liquidity pools through liquidity mining incentives.

Coverage ratio is an important concept in our stableswap. The simplified principle is this: **The higher the coverage ratio, the greater the HUM emission is to the stablecoin account**. The Interest Rate Model protects against coverage ratio manipulation. Most protocols rebalance their pools based on arbitrage activities. We have invented a new way to rebalance the pool based on HUM emission (interest rate of stablecoins). The new model incentivizes balance across pools, and all users can enjoy stable yields on their deposits.

The natural market movement is an opportunity to receive more HUM from your staked assets. This incentivizes existing LPs to reallocate their liquidity while restoring different stablecoin accounts’ coverage ratios back to 1.

## How it works?

Let’s take this illustration here as an example. You staked 20K USDT on Hummus Exchange, and assume the coverage ratio of USDT at the time is lower than USDC. USDC will have a higher APR than USDT. To reiterate, the higher the coverage ratio, the greater the APR.

![](https://miro.medium.com/max/1400/1*qSkTqMdTVrvcqV8JTXNIfw.jpeg)

Liquidity providers can chase better yields by reallocating their deposits. In this case, you may choose to unstake your 20K USDT, swap it for USDC, then stake that 20k USDC on Hummus Exchange. So now, you can enjoy a higher yield on your staked assets.

LPs get incentivized to maintain equilibrium. There is no actual change in the asset level of USDT and USDC, as the respective amounts remain unchanged. But the liability of USDT decreases by 20K through unstaking, while the liability of USDC increases by 20K by staking. Through this market activity, the coverage ratio of USDT increases, and that’s how our LPs help rebalance the pool. 


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