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 AERO | 5 | 2.94% | 10 | 1.23% |
| Proposed | Base AERO | 3 | 2.32% | 8 | 0.739% |
Rationale
- We observe Base AERO with nearly optimal utilization(quite close to the kink) at 84.54%.
- Although this is encouraging, there are still fairly substantial incentives being applied for both suppliers and borrowers.
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We propose reducing the incentive APY by roughly 50 basis points for both suppliers and borrowers. This should lead to greater interest rate discovery and provide incentive savings via lower COMP emissions.
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The proposed changes are expected to save nearly $70,000 annually in COMP savings at current prices. This represents approximately a 27% reduction in the cost of COMP emissions.
- We have observed a significant increase in utilization over the past month. Therefore, we anticipate that these changes will not greatly affect utilization. This overall decrease in incentives will also help align the market closer to an unincentivized state, allowing for natural interest rate discovery to occur while simultaneously reducing costs for Compound.
Next Steps
- We welcome community feedback.