Over the past several weeks, Dharma has written and tested an updated interest rate model for cDAI. This updated interest rate model allows for the following parameters to be updated by governance proposal (ie. no-code updates):
Interest Rate at 0% Utilization
Interest Rate at 100% Utilization
The Utilization % at which the model “kinks”
Interest Rate at the “kink”
Toggle for whether to couple the cDAI interest rate to DAI Savings Rate in Multi-Collateral DAI
We believe this model can form the basis for the interest rate models of other cAssets, including cUSDC and cUSDT, which we believe should have models of a similar nature. We encourage other community members to adapt this code to do so, and will enthusiastically support proposals to update the interest rate models of other cAssets to models of this format.
We intend to submit this update as a formal proposal on Thursday, 23 June 2020.
Brendan / Dharma; love this; a governance-upgradable cDAI interest rate model is a big win for the community.
The changes to the parameters appear rational, and bring the parameters closer in line to other markets.
Concerns: once executed, this will immediately increase interest rates in the DAI market, which users should be aware of.
Future improvements: de-coupling the model from the MakerDAO system would allow an interest rate model to be used by both DAI/USDT–and create more consistency across markets. This would require deploying a new contract, but most of the work was done for this contract upgrade.
This feature automatically incorporates the DAI Savings Rate into cDAI interest rate calculations. It can be toggled off because when DSR is zero it can be undesireable to have the two systems tied together. But when toggled on, the cDAI model ensures that Compound’s borrow and lend rates are competitive with the MCD system.
To clarify the DSR “toggle”, this contract actually just retains the existing integration with Maker contracts. The configurability here comes from the introduction of a new JumpRateModel version that incorporates updateable parameters and is inherited by the proposed cDai interest rate model.