The utilisation curve
Rates are a function of utilisation — the share of the pool currently borrowed. At low utilisation borrowing is cheap to attract demand. Past a target point the rate rises steeply, which pushes borrowers to repay and suppliers to deposit, keeping some liquidity available for withdrawals.
This is why supply rates move constantly without anybody setting them, and why a high advertised rate often means the pool is nearly fully borrowed.
Collateral instead of credit
Loans are overcollateralised: you post more value than you borrow. There is no identity, no credit score and no repayment schedule. The protocol does not need to trust you because it can sell your collateral if the position becomes unsafe.
That is also the whole risk for a borrower. Price moves against your collateral and the position is liquidated automatically.
What a supplier is actually exposed to
Smart contract failure, oracle manipulation, a collateral asset collapsing faster than liquidators can act, and liquidity risk — if utilisation hits the ceiling you cannot withdraw until borrowers repay or new deposits arrive.
The interest is real. So is each of those, and the rate is the compensation for them.
Reading a rate before accepting it
Check whether the headline figure is base interest or includes token incentives, which can stop at any time. Check utilisation, the collateral assets accepted, and the oracle the protocol uses. Check whether the rate shown is current or a trailing average.
FBT Swap surfaces lending data from the protocols themselves with their source, and shows an unavailable state rather than an invented number when a source is down. No figure shown anywhere is a promised return.