Summary
Gauntlet suggests revising the allocation of Daily COMP Rewards to optimize incentive spending relative to supply and borrow activity, ensuring a more efficient distribution of rewards and further aligning rates of ETH based comets with broader markets.
Specification
The recommended rewards are for the following comets:
| Comet | Current COMP Supply Rewards | Recommended COMP Supply Rewards | Current COMP Borrow Rewards | Recommended COMP Borrow Rewards |
|---|---|---|---|---|
| Mainnet WETH | 35 | 20 | 20 | No Change |
| Mainnet wstETH | 6 | 3 | 4 | 3 |
| Optimism WETH | 5 | 3 | 5 | No Change |
| Base WETH | 3 | 2 | 3 | 2 |
| Arbitrum WETH | 6 | 3 | 5 | No Change |
Total COMP incentives across all listed Comets
| Supply side | Borrow side | Total | |
|---|---|---|---|
| Current COMP / day | 55 COMP | 37 COMP | 92 COMP |
| Recommended COMP / day | 31 COMP | 36 COMP | 67 COMP |
The above recommendations would reduce COMP emissions from 92 COMP/day to 67 COMP/day translating to $1250/day or $456k/yr in savings based on current COMP prices.
Rationale
Floating WETH Supply APYs across Comets have remained elevated relative to market benchmarks for an extended period. To address this, we recommend reducing COMP Supply Rewards to better align with prevailing market rates while maintaining competitive positioning. Additionally, we propose fine-tuning COMP Borrow Rewards to drive utilization closer to kink and mitigate negative reserve growth.
Mainnet WETH Comet
Mainnet WETH Comet Supply/Borrow Elasticity
The Mainnet WETH Comet exhibits relatively low elasticity on both the supply and borrow sides. To reduce inefficient incentive spend, we recommend decreasing COMP Supply rewards from 35 to 20 COMP/day, while keeping Borrow rewards unchanged.
Mainnet wstETH Comet
Mainnet wstETH Comet Borrow/Supply Elasticity
Borrow behavior on the Mainnet wstETH Comet indicates high inelasticity, suggesting that demand is not significantly influenced by rewards. To better align with market conditions and curb excess incentives, we recommend reducing Supply rewards from 6 to 3 COMP/day and Borrow rewards from 4 to 3 COMP/day.
Optimism WETH Comet
Optimism WETH Comet Borrow/Supply Elasticity
This market demonstrates highly elastic dynamics, particularly on the supply side. Given the responsiveness, we recommend reducing Supply rewards from 5 to 3 COMP/day, while keeping Borrow rewards unchanged to maintain current borrow behavior.
Base WETH Comet
Base WETH Comet Supply/Borrow Elasticity
Similar to wstETH on Mainnet, the Base WETH Comet shows strong borrower inelasticity, implying limited responsiveness to rewards. We recommend trimming both Supply and Borrow rewards from 3 to 2 COMP/day to reduce inefficiencies.
Arbitrum WETH Comet
Arbitrum WETH Comet Borrow/Supply Elasticity
The Arbitrum WETH Comet demonstrates high elasticity in both supply and borrow activity. As such, we recommend rebalancing rewards i.e. decreasing supply incentives from 6 to 3 COMP/day and keeping borrow incentives the same to continue encouraging borrowing activity.
Next Steps
- We welcome community feedback
- Push on-chain proposal