Simple Summary
Given the low utilization of Compound V3 WETH on Base and the resulting negative reserve growth, Gauntlet recommends lowering its Supply rewards and adjusting the IR curve.
Analysis
Motivation
Please see the average daily utilization of V3 WETH on Base. Currently, utilization is around 40%, resulting in negative reserve growth.
Reward Recommendations
Gauntlet recommends the following decrease in COMP supply rewards for Base v3 WETH comet:
| Enabled Markets | Daily COMP Supply Rewards (Tokens) | Recommended Daily COMP Supply Rewards (Tokens) | Daily COMP Supply Rewards (USD) | Supply Distribution APY | Recommended Daily COMP Supply Rewards (USD) | Recommended Supply Distribution APY |
|---|---|---|---|---|---|---|
| Compound III WETH (BASE) | 20 | 15 | 1600 | 2.25% | 1200 | 1.62% |
The reward changes are aimed at updating the Recommended Supply APY to 1.62% in the Base v3 WETH comet. These changes result in the following savings:
Aggregate Savings
Aggregate Daily USD Savings for Base v3 WETH comet: ~$400
Aggregate Annual USD Savings for Base v3 WETH comet: ~$146K
IR Curve Recommendations
Gauntlet also recommends setting the WETH BASE comet IR curves to the following parameters:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| Annual Supply Interest Rate Base | 0 | 0 |
| Annual Supply Interest Rate Slope Low | .025 | .015 |
| Supply Kink | .9 | .9 |
| Annual Supply Interest Rate Slope High | 1 | .9 |
| Annual Borrow Interest Rate Base | .005 | .005 |
| Annual Borrow Interest Rate Slope Low | .035 | .0155 |
| Borrow Kink | .9 | .9 |
| Annual Borrow Interest Rate Slope High | 1 | 1 |
See recommended IR below.
Gauntlet will closely monitor this market and work with the community to recommend further adjustments, if necessary, such as increasing borrow incentives, making more IR curve changes or including other LST collaterals, to achieve better market capital efficiency.
Next Steps
Target on-chain vote 3/25/24.