[Gauntlet] Base V3 WETH Comets - Interest Rate Curve & Reward Recommendations (3/18/24)

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.

2 Likes

On-chain proposal has been published here

The proposal was executed here. We thank the community for their participation.