[Gauntlet] - IR Curve and Incentive Recommendations for Stablecoin and WETH Comets

[Gauntlet]

Summary

Gauntlet proposes updating the Interest Rate (IR) curves for all WETH and Stablecoin Comets to better align with prevailing market rates. Specifically, we recommend increasing the borrow APR at the kink from 2.3% to 2.4% for WETH Comets and from 4.5% to 6% for Stablecoin Comets. Additionally, Gauntlet advises revising the allocation of Daily COMP Rewards to optimize incentive spending relative to supply and borrow activity, ensuring a more efficient distribution of rewards.

Specification

WETH Comets

The recommended curves are for the following comets:

Comet
Ethereum WETH
Arbitrum WETH
Base WETH
Optimism WETH
Scroll WETH

Parameter	Current Value	Recommended Value
Annual Borrow Interest Rate Base	0.01	0.01
Annual Borrow Interest Rate Slope Low	0.0145	0.0155
Borrow Kink	0.9	0.9
Annual Borrow Interest Rate Slope High	1.5	1.26
Annual Supply Interest Rate Base	0	0
Annual Supply Interest Rate Slope Low	0.0165	0.0216
Supply Kink	0.9	0.9
Annual Supply Interest Rate Slope High	1.2	1.125

Stablecoin Comets

The recommended curves are for the following comets:

Comet
Ethereum USDC
Ethereum USDT
Ethereum USDS
Arbitrum USDC Native
Arbitrum USDT
Base USDC Native
Polygon USDC
Polygon USDT
Optimism USDT
Optimism USDC
Scroll USDC

Parameter	Current Value	Recommended Value
Annual Borrow Interest Rate Base	0.015	0.015
Annual Borrow Interest Rate Slope Low	0.0333	0.05
Borrow Kink	0.9 (0.85 for Arbitrum USDT)	0.9
Annual Borrow Interest Rate Slope High	4	3.4
Annual Supply Interest Rate Base	0	0
Annual Supply Interest Rate Slope Low	0.039	0.054
Supply Kink	0.9 (0.85 for Arbitrum USDT)	0.9
Annual Supply Interest Rate Slope High	3.6	3.034

Comet	Current COMP Supply Rewards	Recommended COMP Supply Rewards	Current COMP Borrow Rewards	Recommended COMP Borrow Rewards
Ethereum WETH	35	No Change	20	5
Arbitrum WETH	6	10	15	5
Base WETH	6	No Change	1	0
Optimism WETH	10	No Change	5	0
Ethereum USDC	70	No Change	71	35
Ethereum USDT	70	No Change	50	25
Ethereum USDS	25	No Change	25	5
Arbitrum USDC	17	20	50	10
Arbitrum USDT	7	15	35	10
Base USDC	13	No Change	5	0
Polygon USDC	8	0	3	0
Polygon USDT	8	0	4	0
Optimism USDT	5	No Change	5	0
Optimism USDC	5	No Change	5	0
Scroll USDC	6	No Change	2	0

Stablecoin IR curves

WETH IR curves

Next Steps

• Target on-chain proposal 12/7/24

[Tane]

Thank you for this proposal, @Gauntlet. we believe this is a solid proposal, and we’ve voted in favor. However, we noticed that while the forum discussions primarily focused on adjusting the interest rate curves and revising COMP rewards, the latest proposal includes an increase in supply caps. We would appreciate it if you could provide more clarity on the market conditions or context that necessitated this change, to ensure transparency and help everyone understand the rationale behind it.

Additionally, we’d love to hear back on the question we previously asked about raising the supply cap for sFRAX. Thank you!

[Gauntlet]

Hey @Tane we review supply cap increases based on market demand. A >75% cap utilization warrants an inquiry from our end to evaluate additional cap increases. This is to further accommodate suppliers and not cap growth for these assets. We primarily look at circulating supply for oracles that use primary markets to price them and liquidity for assets that use secondary liquidity to price them.

For sFRAX specifically, we recommended an increase as the supply cap utilization was over 75% since November 22nd. Given the liquidity and cap utilization, sFRAX’s supply cap was increased to 20M sFRAX. Below is a visualization of sFRAX’s supply cap utilization over the course of time.

The address of the top supplier for sFRAX is 0xb1…3f27 and is supplying close to $21M worth of sFRAX as of today.

[Tane]

Thank you for the explanation, @Gauntlet! The >75% utilization threshold is clear, and the context on sFRAX is helpful. While data is often provided, including more details like utilization trends or liquidity assessments for assets in each proposal could further enhance transparency and help everyone better understand the rationale. Thanks again for your continued efforts!