Dharma to Submit Update to cDAI Interest Rate Model

Summary

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):

  1. Interest Rate at 0% Utilization
  2. Interest Rate at 100% Utilization
  3. The Utilization % at which the model “kinks”
  4. Interest Rate at the “kink”
  5. 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.

Specifics

  • New cDAI Interest Rate Model: Deployed Contract
  • New cDAI Interest Rate Model: Github Link to PR
  • Interest Rate Model Parameter Changes:
    1. Change APY at 100% util*:
      1. Current: 15%
      2. New: 25%
    2. Change the Utilization Rate that defines the “kink”:
      1. Current: 90%
      2. New: 80%
    3. Change APY at “kink”*:
      1. Current: 2%
      2. New: 4%
    4. No change to Base Rate per Block (APR at 0% utilization)*:
      1. Current: 0%
      2. New: 0%

*Note that all rates are still “on top of” the DAI interest rate parameters set by MakerDAO governance

Image of Proposed cDAI Interest Rate Model

5 Likes

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.

2 Likes

Great job Dharma on this update. I checked and the bytes match! I fully support this proposal.

1 Like

awesome :+1: I’ll support this proposal.

Toggle for whether to couple the cDAI interest rate to DAI Savings Rate in Multi-Collateral DAI

I don’t understand this part exactly. is this feature for automatic setting(matching with DAI saving rate)?

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.

4 Likes

A governance-upgradable model would be great. Could we have a vote to free budget for an audit? I would expect such change to be properly audited.

1 Like

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.

2 Likes