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Let's say the protocol has 10,000 <TokenIcontoken="WBTC" /> supplied to it and users are borrowing 1,000 WBTC. The utilization rate is thus 10%. What should the rates be?
[^2]: According to [proposal 31](https://compound.finance/governance/proposals/31), the Reserve Factor is a percentage of the borrowers paid interest which can be used by the governance or act as an insurance against borrower default which protects all the suppliers.
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[^3]: Technically, this system is not immune to insider trading. A member of governance can trade before voting. Also since COMP can be borrowed on Compound, one can stake a lot of ETH, borrow COMP, place a large vote, then repay all of the COMP.
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[^4]: At the time of writing Ethereum has been producing ~13 second blocks, so all annualized rates in Compound should be multiplied by approximately 15/13. Although [this number is hardcoded into the smart contract](https://etherscan.io/address/0xbae04cbf96391086dc643e842b517734e214d698#code), the rate model may be updated in the future via governance.
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