[Gauntlet] Ethereum v3 WETH - Interest Rate Curve Recommendations (04/03/24)

Simple Summary

Gauntlet recommends updating the Interest Rate (IR) Curve in the Ethereum v3 WETH comet to increase utilization and reserve growth.

Specification

Parameter Current Recommended
Annual Borrow Interest Rate Base 0.005 0.01
Annual Borrow Interest Rate Slope Low 0.030 0.014
Borrow Kink 0.9 0.85
Annual Borrow Interest Rate Slope High 1.0 0.53
Annual Supply Interest Rate Base 0 0
Annual Supply Interest Rate Slope Low 0.023 0.0185
Supply Kink 0.9 0.85
Annual Supply Interest Rate Slope High 1.0 0.45

Analysis

The above chart displays historical WETH Borrow and Supply APRs within the Ethereum v3 WETH comet for this year. Given the current IR Curve, fluctuations in WETH borrow demand has lead to periods of low utilization and reserve growth.

To promote efficient utilization amidst low demand, the recommended IR Curve sets a WETH Borrow APY of 2.19% at the 85% utilization kink, reflecting this year’s observed low demand rates.

Next Steps

  • Submit On-chain Proposal on April 8th.
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The proposal was executed here. We thank the community for their participation.