[Gauntlet] Ethereum v3 USDC & Polygon v3 USDC.e - Interest Rate Curve Recommendations (12/21/23)

Proposals
1

Simple Summary

To ensure that Borrow APR at the kink in all USDC comets is set 6% and max Borrow APR in all USDC comets is > 30%, Gauntlet recommends the following Interest Rate Curve updates to the Ethereum v3 USDC and Polygon v3 USDC.e comets:

Ethereum v3 USDC Current vs Proposed IR Curve

Screen Shot 2023-12-21 at 1.31.43 PM
Screen Shot 2023-12-21 at 1.31.43 PM2898×1554 376 KB

Polygon v3 USDC.e Current vs Proposed IR Curve

Screen Shot 2023-12-21 at 1.16.06 PM
Screen Shot 2023-12-21 at 1.16.06 PM2876×1558 362 KB

Analysis

Gauntlet’s Polygon v3 USDC.e - Interest Rate Curve Recommendations (12/7/23) and Ethereum v3 USDC Reward Recommendations (12/6/23) proposals recently executed. Due to even higher recent demand, we recommend further increasing the rate caps and the Borrow APR rates at the kink, to be in line with our most recent Arbitrum v3 USDC Native, Arbitrum v3 USDC.e, & Base v3 USDbC - Interest Rate Curve Recommendations (12/13/23) recommendations.

Ethereum v3 USDC current vs proposed IR curve

Screen Shot 2023-12-21 at 1.31.43 PM
Screen Shot 2023-12-21 at 1.31.43 PM2898×1554 376 KB

The chart above displays the current and proposed Ethereum v3 USDC IR curve, including projected annual reserve growth based on a $375M borrowing amount. The proposed curve maintains the kink at 93%, while adjusting the slopes to set the Supply APR at the kink to 4.46% and the Borrow APR to 6.00%, up from 3.16% and 4.10% respectively.

The proposed Ethereum v3 USDC IR curve requires the following parameter changes:

  • Raise Annual Borrow Interest Rate Base from 0.01 to 0.015
  • Raise Annual Borrow Interest Rate Slope Low from 0.0333 to 0.0484
  • Raise Annual Borrow Interest Rate Slope High from 1.5 to 3.9
  • Raise Annual Supply Interest Rate Slope Low from 0.034 to 0.048
  • Raise Annual Supply Interest Rate Slope High from 1.5 to 3.4

Polygon v3 USDC.e current vs proposed IR curve

Screen Shot 2023-12-21 at 1.16.06 PM
Screen Shot 2023-12-21 at 1.16.06 PM2876×1558 362 KB

The chart above displays the current and proposed Polygon v3 USDC.e IR curve, including projected annual reserve growth based on a $24M borrowing amount. The proposed curve maintains the kink at 85%, while adjusting the slopes to set the Supply APR at the kink to 4.08% and the Borrow APR to 6.00%, up from 3.40% and 4.90% respectively.

The proposed Polygon v3 USDC.e IR curve is the same as the one proposed for the Arbitrum v3 USDC.e, Arbitrum v3 USDC Native, and Base v3 USDbC, and requires the following parameter changes:

  • Raise Annual Borrow Interest Rate Slope Low from 0.04 to 0.053
  • Raise Annual Borrow Interest Rate Slope High from 0.7 to 1.8
  • Raise Annual Supply Interest Rate Slope Low from 0.04 to 0.048
  • Raise Annual Supply Interest Rate Slope High from 0.65 to 1.6

Next Steps

  • Target on-chain proposal 12/24/23
2 Likes
2

With such a steep slope after the kink, have you considered setting the kink % a little higher so we stay under it more of the time? I think we have seen sustained borrow demand around 6% so there is a risk of usage hovering above/below the kink, and with such a steep post-kink slope interest rates will be very volatile and require heavier monitoring from borrowers.

3

We posted the on-chain proposal here. Voting begins in 1 day and lasts for 3 days.

4

The proposal has passed and been executed. We thank the community for their participation.