Simple Summary
Gauntlet recommends the following incentive adjustments to the protocol:
Incentive Parameters
| Status | Comet | Daily COMP Supply Rewards | Supply Incentive APY | Daily COMP Borrow Rewards | Borrow Incentive APY |
|---|---|---|---|---|---|
| Current | Base USDS | 24 | 3.18% | 12 | 1.89% |
| Proposed | Base USDS | 20 | 2.65% | 12 | 1.89% |
Rationale
- The Base USDS Comet has nearly optimal utilization (close to the kink) at 83.74%.
- While this is encouraging, there are still significant incentives for both suppliers and borrowers.
- Gauntlet proposes reducing the incentive APY for suppliers by roughly 50 basis points to drive utilization closer to the kink and provide incentive savings via lower COMP emissions.
- The proposed changes are expected to save $62,123 annually in COMP savings at current prices, representing an approximate 17% reduction.
- We have observed a consistent level of utilization over the past month. As a result, we expect that these changes will effectively move the market toward a higher utilization equilibrium. This reduction in incentives will help align the market more closely with an unincentivized state, facilitating natural interest rate discovery while also lowering costs for Compound.
Proposed Annual COMP Incentive Reduction (at current prices): $62,123
Next Steps
- We welcome community feedback.