[Gauntlet] Interest Rate Curve Recommendations in Stablecoin Comets (8/22/24)

[Gauntlet]

Summary

Gauntlet recommends updating the IR Curves for all stablecoin comets to lower the borrow APR at the kink from 6% to 4.5% to incentivize higher utilization.

Specification

Parameter	Current Value	Recommended Value
Annual Borrow Interest Rate Base	.015	.015
Annual Borrow Interest Rate Slope Low	.05	.0333
Borrow Kink	.9	.9
Annual Borrow Interest Rate Slope High	4.0	4.0
Annual Supply Interest Rate Base	0	0
Annual Supply Interest Rate Slope Low	.052	.039
Supply Kink	.9	.9
Annual Supply Interest Rate Slope High	3.6	3.6

Analysis

Utilization in many stablecoin comets has remained below the kink. To address this, we recommend updating the IR Curve to lower the borrow APR at the kink from 6% to 4.5%. The recommended interest rate curve and implied reserve factor are shown below.

At the 90% kink, the Borrow APR is 4.50% and the Supply APR is 3.51%.

Next Steps

• Target on-chain proposal 8/22/24

[Gauntlet]

Gauntlet wishes to alert the community to a minor discrepancy between the proposal and the above post concerning the borrow slope low values. The variation between the recommended values and those in the proposal amounts to less than a 3 basis points difference, which is not expected to have any significant impact.