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 wstETH | 3 | 0.18% | 3 | 1.52% |
| Proposed | Ethereum wstETH | 0 | 0% | 3 | 1.52% |
| Current | Ethereum WETH | 20 | 0.19% | 20 | 0.21% |
| Proposed | Ethereum WETH | 10 | 0.095% | 20 | 0.21% |
| Current | Optimism WETH | 3 | 0.59% | 3 | 0.67% |
| Proposed | Optimism WETH | 1 | 0.20% | 1 | 0.22% |
| Current | Unichain WETH | 12 | 2.00% | 8 | 1.47% |
| Proposed | Unichain WETH | 8 | 1.33% | 5 | 0.92% |
Rationale
Ethereum wstETH
- We observe that the market for wstETH on Ethereum is currently experiencing low utilization.
- Although borrows are significantly lower than supplies, we note a 0.18% APY incentive for supplying.
- We propose reducing the supply incentive APY to 0% to decrease supply and increase utilization, while maintaining competitive APYs relative to industry trends.
- This adjustment should lead to a $51,793.50 yearly savings in COMP emissions for the protocol at current COMP prices.
Ethereum WETH
- We also observe lower-than-optimal utilization for the Ethereum WETH market.
- There are supply incentives, as seen below:
- We recommend reducing the supply incentive by ~10bps to 0.095% to decrease supply and increase utilization.
- This proposed adjustment should yield a savings of $172,645 in reduced COMP emissions for the protocol annually.
Optimism WETH
- The utilization of Optimism WETH is fairly close to optimal.
- We note that there is still incentivization on both the supply and borrow APYs.
- We recommend reducing the APY incentives to 0.20% for supply and 0.22% for borrowing. This adjustment should help maintain strong utilization rates and keep our APYs competitive compared to industry standards.
- These adjustments should yield a total of savings of $69,058 in COMP emissions for the protocol annually.
Unichain WETH
- Unichain ETH is also close to optimal utilization.
- However, there are substantial incentives for both the supply and borrowing APYs.
- We recommend cutting the APY to 1.33% for supplies and 0.91875% for borrows respectively. This should minimally affect utilization and keep APY rates in line with industry trends.
- These proposed reductions should lead to a savings of $120,851.5 in COMP emissions from the protocol annually.
Proposed Net Annual COMP Incentive Savings: $414,348 (~8760 COMP)
Next Steps
- We welcome community feedback.