Interest Rate

LX uses LGOLD vs USD real time premium to generate the current (per 8 hour) interest rate. The annualized interest rate moves from 0\% to a 15\% cap, while the premium goes from 0% up.

In LX initial iteration, the interest rate is calculated in the following manner:

• b_LUX = $ GOLD oz value traded for 1 LGOLD on LX

• b_market = $ GOLD oz value being traded for 1 USD on a collection of major exchanges

• premium = (b_LUX - b_market)/b_market

• Setting the interest rate:

  • if (premium = 0%): interest_rate = 0%

  • if (0% < premium ≤ 2%): interest_rate = 2%

  • if (2% < premium ≤ 15%): interest_rate = premium

  • if (premium > 15%): interest_rate = 15%

The initial 2% is set to create a threshold to help trigger action on the part of the issuer - people tend to understand a fixed threshold better and are more likely to act upon one. LX also caps the interest rate at 15% to make sure that the holder of the asset won't feel insecure about a potentially limitless interest rate that continuously rises.

The system then automatically calculates the interest rate based on the average premium over the past 8 hours on LX and then takes a snapshot of all LGOLD holding and issuances at the end of that 8 hour period. Once every 8 hours, the holders of LGOLD's account is deducted by the interest (they will have less LGOLD) and the issuers' accounts receives deposits of LGOLD by the exact same amount. All deductions and deposits are done in proportion to the snapshot of LGOLD holdings and issuances.