# Lending Pool Lending Pool is a crucial component of Project Galapago. It's a smart contract that aggregates users' deposits and manages users' borrowings for a specific asset. Each asset supported by Project Galapago has its unique LendingPool. The interaction between depositors and borrowers within a pool creates a dynamic ecosystem that regulates itself based on the utilization of the pool. ### Utilization Ratio The utilization ratio ($$U$$) of a pool is defined as the ratio between the total borrowed amount and the total deposited amount in the pool: $$ U=\frac {Total Borrowed Amount} {Total Deposited Amount} $$ The protocol leverages $$U$$ to maintain balance in the pool between deposits and loans. The utilization ratio plays a critical role in determining the interest rates for depositors and borrowers, and in ensuring that the pool remains sustainable and liquid. * When $$U$$is high, it indicates that the pool has a high borrowing relative to the deposits. This situation reduces the available liquidity, which could pose problems if many depositors decide to withdraw their funds simultaneously. To mitigate this, the protocol increases the borrowing interest rate, and consequently, the deposit interest rate. This approach discourages new loans while incentivizing new deposits, thereby restoring liquidity to the pool. * Conversely, when $$U$$ is low, it implies that there is excess liquidity in the pool. In this case, the protocol decreases the borrowing interest rate, and consequently, the deposit interest rate. This action incentivizes new borrowings and discourages further deposits, thereby ensuring the efficient utilization of the pool's assets. This automatic adjustment of interest rates based on the utilization ratio ensures that the pool remains sustainable and attractive for both depositors and borrowers. It enables the protocol to balance the needs of depositors for returns on their deposits and borrowers for affordable interest rates on their loans. This system also ensures that the liquidity of the pool is always maintained, protecting the interests of all users of the protocol. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.galapago.app/lending-pool.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.