> For the complete documentation index, see [llms.txt](https://stellaprime.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://stellaprime.gitbook.io/docs/pay-as-you-earn-paye-model.md). # Pay-As-You-Earn (PAYE) Model StellaPrime Introduces the PAYE Model to Replace the Utilization-Based Interest Rate Model (IRM) The prevalent interest rate model (IRM) is what limits users from generating real DeFi yields. In practice, IRM creates misaligned incentives and imposes such a win-loss relationship between lenders and borrowers. * Interest Rate Model (IRM) is **disconnected from the yields** borrowers can earn in the market, the quoted interest rate from the model is not reflected in the actual yield that the leveragoors can earn in the market. * Lenders enjoy higher yields at the cost of borrowers who **pay high interest rates** on borrowed funds, pressuring borrowers to generate even higher yields to justify these interest payments. * Large position sizes of whales and institutions can spike interest rates due to high utilization, capping leveragoors' yields, resulting in **negative APY and reduced incentives**.

With DeFi is **NOT** going to have 3-digit or 4-digit yield opportunities anymore, Stella’s 0% cost to borrow and **Pay-As-You-Earn (PAYE) model** are the ultimate solutions for the current and future DeFi market. Stella has replaced the utilization-based IRM with the **PAYE Graph - a curve that determines the proportion of leveragoors' generated yield allocated to lenders**. This aligns the incentives of both leveragoors and lenders, facilitating fair and genuine DeFi yields for all participants. This advancement sets a new fundamental standard for the next-level DeFi innovation by introducing innovative methods of leveraging and lending.

Yield Share Based VS IRM Based Net Yield

## PAYE Model In-Action **Leveragoors will not experience any borrowing costs, irrespective of the asset's utilization rate. They will bear cost only when they generate yields**, in accordance with Stella's PAYE Graph, wherein a yield share portion is taken from the generated yields. These yields cut from leveragoors are shared with lenders, enhancing capital efficiency while putting no maximum cap on lending APY. It’s a collective incentive alignment between leveragoors and lenders alike.