Summary
Due to a substantial increase in USDC supply in the Arbitrum USDC comet, driven by the Alphagrowth team’s incentive growth plans (details here), Gauntlet recommends updating the risk, incentive, and interest rate curve parameters to further incentivize growth at higher utilization.
Specification
Risk Recommendations
| Parameter | Current Value | Recommended Value |
|---|---|---|
| WETH Supply Cap | 10,000 | 40,000 |
| WETH Liquidation Factor | 85% | 90% |
| WETH Collateral Factor | 78% | 83% |
| WBTC Supply Cap | 1,200 | 2,000 |
Interest Rate Curve Recommendations
| Parameter | Current Value | Recommended Value |
|---|---|---|
| Annual Borrow Interest Rate Base | .015 | 0.0136 |
| Annual Borrow Interest Rate Slope Low | .0833 | 0.0626 |
| Borrow Kink | 0.9 | 0.9 |
| Annual Borrow Interest Rate Slope High | 4.3 | 4.3 |
| Annual Supply Interest Rate Base | 0 | 0 |
| Annual Supply Interest Rate Slope Low | .075 | 0.062 |
| Supply Kink | 0.9 | 0.9 |
| Annual Supply Interest Rate Slope High | 3.6 | 3.94 |
COMP Distribution Recommendations
| Parameter | Current Value | Recommended Value |
|---|---|---|
| Daily COMP Supply | 17 | 17 |
| Daily COMP Borrow | 8 | 50 |
Analysis
As shown in the above graph, the Arbitrum USDC Comet has experienced a significant increase in USDC supply, driven by the Alphagrowth team’s incentive growth plans. More information can be found here.
Currently, USDC utilization is at 37%. To maintain momentum and attract users to borrow USDC, we recommend updating the interest rate curve to decrease the borrow APR at the kink from 9% to 7%. This update also reduces the implied reserve factor, offering more appealing rates to both suppliers and borrowers. Additionally, we suggest increasing the daily COMP borrow emissions from 8 to 50, raising the COMP borrow distribution APR from 0.82% to 5.15%.
Although the supply cap utilizations of the blue-chip tokens WBTC and WETH are each less than 50%, we recommend increasing the caps to ensure future suppliers have ample liquidity. DEX liquidity conditions on Arbitrum support these increases.