Calculating interest
Last updated
Last updated
Accounts accrue interest and the given interest rate is inherited by the Product configuration (Agreement with Tesseract) and a configurable account interest ( user interest ) and partner margin.
Interest is distributed to accounts every day. The calculation is based on the balance of the account by the end of each day using the .
Besides accruing interest each account also accrues an optional partner margin which is also defined per Product (per currency).
The interest and margin accrued on the account according to the current flow;
Interest distributed to accounts.
Partner margin accrued. See more
At the beginning of each new day the outstanding balances between the partner and Tesseract is settled, the process of this settlement. See more
Example use case 1
A Partner wants to offer their customers (users) with the ability to earn interest. The partner will integrate to Tesseracts platform to allow the users to deposit capital into interest earning accounts.
Example use case 2
A partner has no direct customers (users) but have available capital that they would like to earn interest on. Or, has no need for the user handling capabilities provided by Tesseract. In this case the Partner can issue a single per currency account to deposit all capital and the partner margin itself is optional can be left out when configured.
Interest is distributed to accounts once an accounting day also known as an accounting cycle has ended. The accounting cycle spans from 00.00.00 - 23.59.59 in the Partners time zone.
This means that accounts accrue interest according to the account balance at the end of the daily accounting cycle and when an accounting cycle has ended the interest will be distributed to an account shortly after around 00.00.00 the following day.
Any deposit or withdrawal done at any time during a given day will affect the account balance upon which upon the interest is calculated.
User earning interest on first deposit (on 3.5% APY Earn account).
Day 1: User deposits 1 BTC. The user has a balance of 1 BTC.
Day 2: The next day, the user received interest for Day 1, and the account balance is now 1.00009425493 BTC.
Users withdrawing all of their total balance
Day 2: User withdraws the available balance of 1.00009425493 BTC.
Day 3: User gets paid no interest on their BTC account since the balance at the end of Day 2 was zero.
Note on edge cases: In practice, an amount can be deposited to an account just before the interest is distributed and will earn still interest on it. This is offset by opposing logic so that when a withdrawal on the account results in no interest being accrued for the balance withdrawn from the account on the day of withdrawal.
Interest is calculated based on the total balance of the user account in the given currency at the end of the previous accounting cycle.
The formula for calculating the interest is a compounding APY method:
user_balance(t) * [(1+interest_rate)^(1/365)-1]
Day 1
User deposits their first deposit of 0.5 BTC to their “Basic BTC interest account,” which defines a tier of interest of 3% for a balance between 0 - 1 BTC and no partner margin configured. The balance of their account is 0.5 BTC.
Day 2
The user gets paid interest;
0.5 * ((1 + 0.03) ^ (1/365)-1)
= 0.5 + (0.5 * ((1 + 0.03) ^ (1/365)-1))
= 0.50004049 BTC (The user has earned 0.00004049 BTC on the given day).
Day 3
0.50004049 + (0.50004049 * ((1 + 0.03) ^ (1/365)-1))
= 0.50008099 BTC
Day 4
0.50008099 + (0.50008099 * ((1 + 0.03) ^ (1/365)-1))
= 0.500121489 BTC