Summary
Gauntlet recommends updating the interest rate curves for all stablecoin comets to lower the borrow APR at the kink from 9% to 6% to incentivize higher utilization.
Specification
| Parameter | Current Value | Recommended Value |
|---|---|---|
| Annual Borrow Interest Rate Base | .015 | .015 |
| Annual Borrow Interest Rate Slope Low | .0833 | .05 |
| Borrow Kink | .9 | .9 |
| Annual Borrow Interest Rate Slope High | 4.3 | 4.0 |
| Annual Supply Interest Rate Base | 0 | 0 |
| Annual Supply Interest Rate Slope Low | .075 | .052 |
| Supply Kink | .9 | .9 |
| Annual Supply Interest Rate Slope High | 3.6 | 3.6 |
Analysis
Utilization in the stablecoin comets has decreased over the last two weeks. To address this, we recommend updating the interest rate curve to lower the borrow APR at the kink from 9% to 6%. This adjustment will help the market reach equilibrium at or slightly above the more efficient 90% kink. The recommended interest rate curve and implied reserve factor are shown below.
At the 90% kink, the Borrow APR is 6.00% and the Supply APR is 4.68%.
Below is a time series of the historical utilization in the Ethereum USDC comet, along with the projected utilization under the current curve based on the same borrow APR demand.
As seen, the recommended curve allows for the market to find equilibrium at utilizations closer to the 90% kink, thereby offering more appealing rates at higher utilization.
Next Steps
- Target on-chain proposal 7/22/24