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Sikh Bitcoin · Expert · Lesson 15 of 21

Variable rates and growing debt

Read a rate as a changing input, not a promise.

About 14 minutes with practice. You only need something to take notes with. No real wallet details or payments are part of this lesson.

Course contents · Lesson 15 of 21
  1. Threat model before tools
  2. Design a custody architecture
  3. Entropy, mnemonics and passphrase tradeoffs
  4. Hardware signing and trusted displays
  5. Multisig and independent control
  6. Recovery and continuity across people
  7. Coin control and privacy tradeoffs
  8. Lightning operations and recovery
  9. Payment operations and reconciliation
  10. Native bitcoin and wrapped claims
  11. USDC, reserves and redemption
  12. Identify a Morpho market precisely
  13. Oracles, prices and measurement risk
  14. LTV, liquidation and nonlinear losses
  15. Variable rates and growing debt
  16. Vaults, allocation and exit liquidity
  17. Arc, Base and cross-chain dependencies
  18. Allowances, signing and simulation
  19. Treasury accounting and restricted funds
  20. Incident response with clear human authority
  21. Capstone: a defensible treasury design

What you will learn

  • Distinguish a rate snapshot from realized borrowing cost.
  • Estimate a simplified interest expense with explicit assumptions.

A quoted rate has a context

A variable borrowing rate responds to a market’s rate model and state. Morpho’s documentation describes interest-rate models that react to utilization. A current quote is therefore not a fixed cost for the entire life of a loan. Record the market, observation time, rate convention and whether a displayed number is an annualized estimate.

Keep the arithmetic honest

For an invented principal of 1,000 units and a constant 10% simple annual rate over 30 days, a 365-day approximation gives 1,000 × 0.10 × 30 / 365, about 8.22 units. That is a teaching calculation. Actual protocol accrual, compounding, changing rates and rounding can produce different results. APR and APY are not interchangeable labels.

Model the obligation rather than the headline

A borrowing plan has debt in the loan asset, collateral exposure and possible transaction costs. A supply rate on another product may vary or disappear; it cannot be treated as a guaranteed offset. In a fictional committee review, ask what happens if borrowing becomes more expensive while accessible income falls. Include an exit that does not require a favorable market or uninterrupted application. An attractive rate screenshot is neither an authorization to borrow nor proof of a sustainable strategy.

Practice on paper

Under the simplified assumptions above, what happens to the 30-day interest estimate if the annual rate doubles to 20% for the entire period?

Reveal the worked answer

The simple estimate doubles to about 16.44 units. A real variable-rate loan needs the actual rate path and accrual rules; applying the final displayed rate to the whole past month would be a different, potentially incorrect calculation.

Check your understanding

Choose an answer in your head or on paper, then reveal the explanation. Retry whenever you like. Answers are not submitted or scored; completion marks are your own learning notes.

1. Does today’s variable rate lock next month’s cost?

  • Yes
  • No
Reveal answer 1

No. The market and rate model can change the rate.

2. Can a projected yield be assumed to pay all future interest?

  • Yes
  • No
Reveal answer 2

No. Both streams have distinct risks and can change.

Take this with you

State the rate path and calculation convention before comparing costs.

Your learning, at your pace

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