Kashi uses an elastic interest rate model that responds accordingly to supply and demand. The interest rate gets automatically adjusted relatively to the market utilization of the pool.

If utilization is below 70%, interest rate will drop to incentivize borrowing. If utilization is above 80%, interest rate will increase to attract more liquidity providers and disincentivize borrowing.

The purpose of this is to incentivize liquidity within an ideal range so that funds aren’t over/under used.