If you hold PRIME, you may have noticed that the rate you earn is different from the Democratized Prime HELOC+ rate you see quoted elsewhere. This article explains how the PRIME rate is calculated, what drives it, and why it moves.
The short version
PRIME earns the Democratized Prime HELOC+ utilization rate, minus a 0.50 percent Hastra platform fee. When you deposit into PRIME, your capital is supplied to the HELOC+ lending pool, where the interest rate is set continuously by how much of the pool’s supply is actively being borrowed. Hastra depositors and direct Democratized Prime lenders earn from the same rate function. The only difference for PRIME holders is the 0.50 percent Hastra fee, which is deducted from the rate you earn.
That is why the PRIME rate is slightly lower than the raw DP HELOC+ rate: the difference is the Hastra fee.
Want to learn more about the full breakdown? Continue reading below.
The math
The PRIME rate is calculated as:
javascriptPRIME Rate = HELOC+ Utilization Rate − 0.50%
Where:
- HELOC+ Utilization Rate = the interest rate produced by the Democratized Prime utilization function. It is a function of how much of the pool’s total lending supply is currently being borrowed. Higher utilization means a higher rate; lower utilization means a lower rate. The rate adjusts continuously, block by block.
- 0.50% = the annual Hastra platform fee, deducted from the rate you earn.
A worked example
Suppose the HELOC+ pool is at a utilization level that produces an 8 percent rate from the utilization function. A PRIME holder earns that rate minus the Hastra fee:
javascriptPRIME Rate = 8.0% − 0.50% = 7.50%
In this scenario the HELOC+ utilization rate is 8 percent, and PRIME holders earn approximately 7.50 percent after the Hastra fee. If borrower demand rises and utilization climbs, the PRIME rate moves up with it. If lender supply outpaces borrower demand and utilization falls, the PRIME rate compresses. Because the rate is set continuously, these movements flow through in real time rather than waiting for a fixed cycle.
What makes the PRIME rate move?
One thing drives the PRIME rate: utilization — the share of the HELOC+ pool’s lending supply that is actively being borrowed. The utilization function maps that percentage to an interest rate along a curve, similar to how lending protocols like Aave set rates.
Utilization rises when borrower demand increases relative to lender supply, which pushes the rate up. It falls when lender supply grows relative to borrower demand, which pulls the rate down. Hastra is a price taker: it passes through whatever the utilization function produces rather than setting its own rate.
Because the function responds continuously, large deposits or withdrawals affect the rate immediately. Adding a large amount of lender supply lowers utilization, and the rate, while a large withdrawal or a surge in borrowing raises it.
What is changed
Previously, the Democratized Prime rate was set by an hourly Dutch auction, and PRIME earned a blended rate: the portion of capital matched to borrowers earned the DP clearing rate, while unmatched capital earned the YLDS rate. That system has been replaced. Following the smart-contract migration, the rate is now set by a continuous utilization function, and Hastra depositors and direct Democratized Prime lenders earn from the same rate function. The blended matched/unmatched model no longer applies: the PRIME rate is simply the pool’s utilization rate minus the 0.50 percent Hastra platform fee.
The key differences under the new system:
- Rate adjustment: Continuous (block by block) instead of hourly. No more waiting for the next auction cycle.
- Volatility: Expect the rate to be somewhat more responsive than before. Large deposits or withdrawals now flow through to the rate in real time.
- Simplicity: A single utilization-based rate that everyone earns, replacing the old blended-rate concept. The PRIME rate is the pool’s utilization rate minus the 0.50 percent Hastra fee.
Frequently Asked Questions
Why is the PRIME rate lower than the DP HELOC+ rate?
Because PRIME holders pay the 0.50 percent Hastra platform fee, which is deducted from the rate. PRIME earns the same HELOC+ utilization rate as direct Democratized Prime lenders; the fee is the difference.
Can the PRIME rate go below the YLDS rate?
Under the new utilization model, the PRIME rate tracks the HELOC+ utilization rate minus the Hastra fee, so it moves with how much of the pool is being borrowed. At very low utilization the rate compresses toward the bottom of the utilization curve.
Does anyone at Figure or Hastra set the PRIME rate manually?
No. The rate is determined entirely by the utilization function - a product of how much of the pool’s supply is being borrowed. Neither Figure nor Hastra sets or adjusts it manually.
Will the migration affect my deposits?
No action is required on your part. The migration redirects which pool Hastra points to on the backend. There may be a brief transition period of approximately one hour where the system switches over. Your deposits remain intact throughout.
Will the rate be higher or lower after migration?
It depends on utilization at any given moment. The structural difference is that the rate is more responsive to supply and demand in real time. It may be more volatile on a block-by-block basis, but it more accurately reflects the true market-clearing rate for HELOC+ lending at any point in time.
What is the 0.50 percent Hastra fee?
This is an annual platform fee that Hastra charges for providing DeFi access to Democratized Prime yields. It is deducted from the rate you earn. Direct Democratized Prime lenders on Provenance do not pay this fee, but they also do not benefit from Hastra’s DeFi composability, multi-chain access, and simplified user experience.
Rates or returns associated with Democratized Prime are not fixed or guaranteed and may vary based on pool composition, borrower performance, auction dynamics, and prevailing market conditions. Terms and conditions available at figuremarkets.com/disclosures.
This article is for educational purposes only and does not constitute financial advice. Always do your own research and consider consulting with financial professionals before making investment decisions.