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 | Ethereum WBTC | 1 | 0.65% | 0 | 0% |
| Proposed | Ethereum WBTC | 10 | 1.02%(at kink) | 10 | 1.19%(at kink) |
| Current | Ethereum wstETH | 0 | 0% | 3 | 2.78% |
| Proposed | Ethereum wstETH | 0 | 0% | 1 | 0.93% |
| Current | Ethereum WETH | 10 | 0.04% | 20 | 0.11% |
| Proposed | Ethereum WETH | 5 | 0.02% | 10 | 0.06% |
| Current | Ethereum USDS | 12.5 | 1.81% | 5 | 0.80% |
| Proposed | Ethereum USDS | 6 | 0.88% | 2 | 0.32% |
| Current | Ethereum USDT | 70 | 0.51% | 50 | 0.41% |
| Proposed | Ethereum USDT | 35 | 0.26% | 25 | 0.21% |
| Current | Ethereum USDC | 71 | 0.19% | 70 | 0.22% |
| Proposed | Ethereum USDC | 35 | 0.09% | 35 | 0.11% |
Rationale
Ethereum WBTC
- We observe that the market for WBTC on Ethereum is currently experiencing low utilization.
- The protocol is supplying incentives but there has been little demonstrated user demand so far.
- We propose increasing COMP rewards for 10 COMP per day on the supply side and 10 COMP per day on the borrow side. These values bring the comet to market-leading APYs which should attract new borrows. Overall, the incentives should bootstrap effectively utilization and overall borrow volume.
- This adjustment should lead to a $306,457.65 ****yearly additional COMP emissions for the protocol at current COMP prices.
Ethereum wstETH
- We also observe low utilization for the Ethereum wstETH market.
- This is despite active borrow side incentives.
- We recommend reducing the borrow incentive to 1 COMP daily (~0.93% APY) as there is little demonstrated user demand. Incentives can be directed elsewhere more effectively.
- This proposed adjustment should yield a savings of $30,433.70 in reduced COMP emissions for the protocol annually.
Ethereum WETH
- We also observe utilization below kink for the Ethereum WETH market.
- Currently the protocol provides incentives for both supply and borrow APYs.
- We recommend reducing daily supply spend to 5 COMP (~0.02 APY) and borrow spend to 10 COMP (~0.06% APY). The proposed adjustment should aid market utilization while maintaining competitive rates and conserving COMP tokens.
- This proposed adjustment should yield a savings of $228,252.75 in reduced COMP emissions for the protocol annually.
Ethereum USDS
- The utilization on Ethereum USDS is slightly over kink.
- We note that the protocol is providing incentives on both the supply and borrow APYs.
- We recommend reducing supply incentives to 6 COMP daily (~0.88 % APY) and borrow incentives to 2 COMP daily (~0.32% APY). We expect the proposed adjustment to have minimal impact on utilization while encouraging natural interest rate discovery while maintaining industry aligned interest rates.
- These adjustments should yield a total of savings of $144,560.08 in COMP emissions for the protocol annually.
Ethereum USDT
- Ethereum USDT is slightly under kink.
- The protocol is currently providing incentives on both the supply and borrow sides.
- Gauntlet recommends reducing daily supply incentives to 35 COMP (0.26% APY) and borrow incentives to 25 COMP (0.21%). This change should have minimal impact on utilization while keeping APY rates competitive with industry trends.
- These reductions should lead to a savings of $913,011.00 in COMP emissions from the protocol annually.
Ethereum USDC
- Ethereum USDC is also slightly above kink.
- We note active incentives on both supply and borrow APYs.
- We recommend reducing supply and borrow incentives to 35 COMP daily, which corresponds to ~0.09% APY and 0.11% APY respectively. We expect the proposed adjustment to minimally affect utilization and keep APY rates in line with industry trends.
- These reductions should lead to a savings of $1,080,396.35 in COMP emissions from the protocol annually.
Proposed Net Annual COMP Incentive Savings: $2,090,196.23(~50,553 COMP)
Next Steps
- We welcome community feedback.