Summary
Below are Gauntlet’s initial recommendations on interest rate curves for the WETH Comet for Compound III.
wstETH/cbETH supply → 0% (standard)
WETH borrow
Utilization 0% → 1% APR
Utilization 90% → 5.2% APR (match stETH stake rate)
Utilization 100% → 10.4% APR (double stETH stake rate)
Linear in between
WETH supply
Utilization 0% → 0% APR + COMP incentive
Utilization 90% → 1.7% APR + COMP incentive
Utilization 100% → 7.8% APR + COMP incentive
Linear in between
Recommendation Specification
borrowKink = 900000000000000000
borrowPerSecondInterestRateBase = 315360530
borrowPerSecondInterestRateSlopeHigh = 16398720000
borrowPerSecondInterestRateSlopeLow = 1639871893
supplyKink = 900000000000000000
supplyPerSecondInterestRateBase = 0
supplyPerSecondInterestRateSlopeHigh = 19236960000
supplyPerSecondInterestRateSlopeLow = 536111569
Note that these numbers will differ slightly from the APR numbers because of compounding interest in blocks.
Methodology and Rationale
Some core assumptions to this recommendation are that 1.) stETH has an annualized yield of approximately 5%, 2.) the current utilization statistics of the Compound II ETH market are based on the fact that there is no strong use case for borrowing ETH and not that the interest rates are too aggressive, 3.) the Compound III USDC Comet provides reasonable data points, but the WETH Comet will have a significantly different use case, 4.) users will be elastic with regards to interest rate changes around the boundary of stETH annualized yield.
Current USDC Comet IR curves
Since the WETH borrowed cannot be used as collateral, there is less market risk concerning WETH liquidations, and thus there is less need to make the max interest rate especially high.
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