I believe @Alex_BertoG was referring to the fact that a 750% expected APY even after translating to 182k% effective APY still doesn’t reach the daily expected interest rate needed to prevent a liquidity crunch on high rebase days. I agree with her, and don’t think APY is the correct metric to use when discussing this issue. The rebase battles are fought day by day, so it is more appropriate to look at the effective daily rate.
Users being unable to withdraw from AAVE is a very bad situation and needs to be avoided. I don’t think simply raising interest rates is a perfect solution for the reasons @BlockEnthusiast pointed out in the other thread. Even if the daily APR is equal to the rebase, this won’t stop liquidity from being unavailable in the moments leading up to the rebase. So raising interest rates should only have the effect of reducing the amount of time that withdrawals are unavailable. This is an improvement, but this solution is hostile to borrowers and creates instability in the market.
@Naguib Great find on the formula issue. This appears to be the simple interest rate model, and from what I understand about the mechanics of AAVE, the rate is updated every time someone interacts with the lending pool. Assuming that the lending pool is interacted with often, doesn’t this mean that what we were calling APY is essentially APR?