[ARFC] Chaos Labs Risk Stewards - Decrease Slope1 Parameter for Stablecoins on Aave V3 - 01.13.25

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

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