Summary
Gauntlet recommends the following parameter changes to Arbitrum USDT Comet:
| Parameters | Current Value | Recommended Values |
|---|---|---|
| Annual Borrow Interest Rate Base | .015 | .015 |
| Annual Borrow Interest Rate Slope Low | .05 | .05 |
| Borrow Kink | .9 | .85 |
| Annual Borrow Interest Rate Slope High | 4.0 | 3.5 |
| Annual Supply Interest Rate Base | 0 | 0 |
| Annual Supply Interest Rate Slope Low | .052 | .03 |
| Supply Kink | .9 | .85 |
| Annual Supply Interest Rate Slope High | 3.6 | 3.2 |
| Daily Borrow Rewards | 30 | 35 |
| Daily Supply Rewards | 12 | 7 |
Analysis
USDT Arbitrum Supply & Utilization
Since the initiation of the LTIPP program, there has been a significant influx of supply to the Arbitrum USDT Comet, leading to an imbalance in the Comet’s utilization dynamics. To address this, Gauntlet will propose reallocating 5 Daily COMP rewards from the supply side to the borrow side. This adjustment aims to incentivize borrowing activity and increase utilization rates within the Comet.
Recommended IR Curve
The proposed adjustment to the interest rate (IR) curve will decrease the negative reserves threshold to a 31% utilization rate, compared to the recent 7-day average utilization of approximately 34% within the Comet. This recommendation aims to mitigate further negative reserve growth while the LTIPP incentive program is active. However, it is expected to result in a less favorable Supply APY. The table below outlines the projected impact on both Supply APY and Borrow APY at the kink point:
| Utilization | Current APY | Recommended APY |
|---|---|---|
| Supply Kink | 4.68% | 2.5% |
| Borrow Kink | 6% | 5.75% |
Additionally, the reallocation of 5 daily COMP rewards to the borrow side is anticipated to reduce the Net Borrow APY, thereby incentivizing increased borrowing demand.
Next Steps
- Welcome feedback from the community
- Submit on-chain proposal next week