Simple Summary
Gauntlet recommends setting the following initial reward recommendations for the Arbitrum v3 USDC native comet:
- Increase Daily COMP USDC Supply Rewards from 10 to 20 ($292,000/year).
- Increase Daily COMP USDC Borrow Rewards from 0 to 20 ($292,000/year).
Analysis
Below we multiply each asset’s Supply Cap by its Liquidation Factor to calculate the maximum borrowing power per asset. Assuming an average borrow usage (actual borrows / borrowing power) of 70%, the total expected USDC borrows assuming maxed out supply caps is $10,416,000.
| Symbol | Supply Cap (USD) | Liquidation Factor | Borrowing Power | Expected Borrows |
|---|---|---|---|---|
| WETH | $7,800,000 | 85% | $6,630,000 | $4,641,000 |
| WBTC | $7,500,000 | 77% | $5,775,000 | $4,042,500 |
| ARB | $3,000,000 | 60% | $1,800,000 | $1,260,000 |
| GMX | $1,500,000 | 45% | $675,000 | $472,500 |
Currently there is $3.86M USDC supply and $0.73M USDC borrows in the newly launched comet.
Predicting how exactly the new equilibrium is reestablished as a result of this recommended reward distribution is pure speculation, but an equilibrium of $13,888,000 USDC supplied and $10,416,000 USDC borrowed is feasible, as shown in the hypothetical market progression below.
| Supply (USD) | Borrows (USD) | Utilization | Supply APR | Earn Distribution | Net Supply APR | Borrow APR | Borrow Distribution | Net Borrow APR |
|---|---|---|---|---|---|---|---|---|
| $3.86M | $0.73M | 19% | 0.62% | 7.56% | 8.18% | 2.16% | 39.81% | -37.64% |
| $6.94M | $3.47M | 50% | 1.62% | 4.21% | 5.83% | 3.25% | 8.41% | -5.16% |
| $10.42M | $7.81M | 75% | 2.44% | 2.80% | 5.24% | 4.12% | 3.74% | 0.39% |
| $13.89M | $10.42M | 75% | 2.44% | 2.10% | 4.54% | 4.12% | 2.80% | 1.32% |
Next Steps
- Target on-chain proposal 9/18/23.