Overview
In light of recent market changes, Chaos Labs recommends decreasing the Slope 1 parameter for stablecoins by 0.5 percentage points. These changes will be implemented through the risk steward process.
Motivation
The borrow rate for stablecoins across Aave has fallen in recent weeks as the market has pulled back and speculative activity (stemming from sUSDe for example) has decreased. The chart below shows the median stablecoin borrow rate on each Aave V3 instance, with each line weighted according to the total stablecoin borrow on that deployment.
Ethereum Core has demonstrated a clear downward trend following our previous IR curve change, falling from 14.3% to 11.7% as of this writing.
While the interest rate stabilized around 11.5%, the utilization rate of all the assets decreased, significantly worsening the market efficiency. Both USDC and USDT have shown a downwards trend, but utilization rate for USDS in particular has declined sharply, this is caused by the peculiar interest rate curve of the asset, that has a base interest rate of 11.75%. In order to better align the USDS interest rate curve to its demand we will exclude it from this recommendation and propose changes in a separate proposal.
On Arbitrum, the next largest deployment, borrow rates have mirrored this decrease in recent days. The moving average of USDT, USDC, and DAI stands below 12.50%, indicating that it would be optimal for Aave to reduce Slope 1. GHO’s borrow rate MA is currently at 12.57%.
Utilization rates on Arbitrum have also decreased, with USDC declining the most, followed by USDT.
Specification
Protocol | Instance | Asset | Current Slope1 | Recommended Slope1 |
---|---|---|---|---|
Aave V3 | Arbitrum | DAI | 12.50% | 12.00% |
Aave V3 | Arbitrum | USDC.e | 13.50% | 13.00% |
Aave V3 | Arbitrum | USDT | 12.50% | 12.00% |
Aave V3 | Arbitrum | LUSD | 12.50% | 12.00% |
Aave V3 | Arbitrum | USDC | 12.50% | 12.00% |
Aave V3 | Arbitrum | FRAX | 12.50% | 12.00% |
Aave V3 | Arbitrum | GHO | 12.50% | 12.00% |
Aave V3 | Optimism | DAI | 12.50% | 12.00% |
Aave V3 | Optimism | USDC.e | 13.50% | 13.00% |
Aave V3 | Optimism | USDT | 12.50% | 12.00% |
Aave V3 | Optimism | sUSD | 12.50% | 12.00% |
Aave V3 | Optimism | LUSD | 12.50% | 12.00% |
Aave V3 | Optimism | USDC | 12.50% | 12.00% |
Aave V3 | Polygon | DAI | 12.50% | 12.00% |
Aave V3 | Polygon | USDC.e | 13.50% | 13.00% |
Aave V3 | Polygon | USDT | 12.50% | 12.00% |
Aave V3 | Polygon | EURS | 12.50% | 12.00% |
Aave V3 | Polygon | USDC | 12.50% | 12.00% |
Aave V3 | Ethereum Core | USDC | 12.50% | 12.00% |
Aave V3 | Ethereum Core | DAI | 12.50% | 12.00% |
Aave V3 | Ethereum Core | USDT | 12.50% | 12.00% |
Aave V3 | Ethereum Core | LUSD | 12.50% | 12.00% |
Aave V3 | Ethereum Core | FRAX | 12.50% | 12.00% |
Aave V3 | Ethereum Core | crvUSD | 12.50% | 12.00% |
Aave V3 | Ethereum Core | PYUSD | 12.50% | 12.00% |
Aave V3 | Ethereum Core | USDe | 12.50% | 12.00% |
Aave V3 | Ethereum Prime | USDS | 11.75% | 11.25% |
Aave V3 | Ethereum Prime | USDC | 12.50% | 12.00% |
Aave V3 | Ethereum Prime | GHO | 3.00% | 2.50% |
Aave V3 | Ethereum EtherFi | USDC | 12.50% | 12.00% |
Aave V3 | Ethereum EtherFi | FRAX | 12.50% | 12.00% |
Aave V3 | Base | USDbC | 13.50% | 13.00% |
Aave V3 | Base | USDC | 12.50% | 12.00% |
Aave V3 | Metis | m.DAI | 12.50% | 12.00% |
Aave V3 | Metis | m.USDC | 12.50% | 12.00% |
Aave V3 | Metis | m.USDT | 12.50% | 12.00% |
Aave V3 | Avalanche | DAI.e | 12.50% | 12.00% |
Aave V3 | Avalanche | USDC | 12.50% | 12.00% |
Aave V3 | Avalanche | USDt | 12.50% | 12.00% |
Aave V3 | Avalanche | FRAX | 12.50% | 12.00% |
Aave V3 | Avalanche | AUSD | 5.50% | - |
Aave V3 | Gnosis | USDC | 12.50% | 12.00% |
Aave V3 | Gnosis | WXDAI | 12.50% | 12.00% |
Aave V3 | Gnosis | EURe | 12.50% | 12.00% |
Aave V3 | Gnosis | USDC.e | 13.50% | 13.00% |
Aave V3 | BNB | USDC | 12.50% | 12.00% |
Aave V3 | BNB | USDT | 12.50% | 12.00% |
Aave V3 | BNB | FDUSD | 12.50% | 12.00% |
Aave V3 | Scroll | USDC | 12.50% | 12.00% |
Aave V3 | ZkSync | USDC | 12.50% | 12.00% |
Aave V3 | ZkSync | USDT | 12.50% | 12.00% |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
Disclosure
Chaos Labs has not been compensated by any third party for publishing this ARFC.
Copyright
Copyright and related rights waived via CC0