# IBT

Interest Bearing Token

IBT in IPOR is not an ERC20 token. Instead, it's a measure of interest rate over time saved in the token. This allows us to track the floating interest rate between 2 points in time.

IBT is used by the swap AMM to price the floating leg and can be used by anybody who would like to know what the "average" floating rate has been between two blocks.

At inception, the value of the IBT price is set to 1. At every IPOR publication, the IBT price is updated to reflect the accumulating rate. Rate is added without compounding using the following formula:

$IBT_{new} = IBT_{old} \cdot e ^{\frac{IPOR \cdot \Delta T}{T_{Year}}}$

Where IBT is the price at the rebalancing -

*n*is the current rebalancing,*n-1*is the moment of the last rebalancing. Delta T is the time that has passed between 2 rebalancings.IBT is a valuable measurement of the closely approximated, on-chain value of the Inter-Protocol Offered Rate (floating) over time.

Above formula is of course a formula for continuously compounding interest rate. This is the standard accross IPOR Protocol. It's worth noting that AAVE currently uses compounding every second and Compound "compounds" interest every day. Because of the different rate of compounding there is a difference how APR converts to APY however markets already price those difference in since the main number that is refered to is actually APY.