This is a super exciting development, and I plan to vote in favor! Big ups to all contributors involved in shipping v3.
Due to v3’s separation of supply and borrow rate curves, this proposal does have interesting side effect of allowing for negative reserve accruals at certain utilization rates (total funds paid to suppliers could exceed funds earned from borrowers). Based on current parameters, utilization below ~50% or above ~85% would result in slow reduction in market reserves.
The magnitude of potential negative accrual is small, and with Compound providing 500k USDC in up front reserves I don’t think this presents any risk to the protocol in the short term. In a way this subsidizes users that help keep utilization within a target range so maybe it will help with bootstrapping the market. However I’m not convinced of the business case for setting rate models that allows for negative reserve accrual over the long term. It may be worth revising the rate models after gaining some empirical data from early market operations.