Thanks everyone for the feedback.
First, apologies for not following up on individual comments. With travel and life demands, it’s sometimes difficult to always be available when it’s needed. But starting this forum thread means I still have a duty to help drive towards consensus. I’ll do better in the future. Ampleforth is also trying to build a mature governance ecosystem, and I only hope we can match the quality I’ve seen so far within Aave’s community.
As mentioned in the first post, we feel there is a need for a near-term resolution independent of longer term platform development. An ideal solution would be a continuous curve or a dynamic cap that responds to time in a utilization band. That’s coming down the pipe, but it’s not here yet.
Now for the details of the proposal itself. It does seem there is consensus about raising the interest rate cap now. The only question might be to what value.
While I do support ongoing discussion, there is just not enough data available to arrive at what anyone would call a perfect number. 10K+% is already a drastic change, and I think it’s most responsible to give time for the market to incorporate this before going any farther.
If the curve gets too steep, then it adds more unpredictability to the rates for the borrowers. This ends up, in the worst case, punishing or driving away those borrowers who are not playing the short-term rebase game. But these are exactly the people we want long term for a healthy market.
I do want to say, however, that we do not want to mirror the behavior between supply adjustments and depositor income as some have suggested. The market for passive yield shouldn’t necessarily compete with exposure to AMPL rebases. Healthy markets need to satisfy actors with different risk profiles and goals. Depositors trade off exposure to rebase for income from interest. They will not get the full positive rebase amounts, but presumably they will also not get the full negative (and they’ll get interest too). This is as designed and what the Ampleforth community expects. However, 100% utilization for long periods of time is not intended behavior, and what we’re trying to address at this moment.
We feel the current interest rate as proposed can add more stability. It’s a significant step in the right direction, and we think it’s best if the Aave community gives the market a chance to incorporate this before going any further.