[ARFC] Chaos Labs - Stablecoin IR Curves Updates


A proposal to increase stablecoin Interest Rate parameters across all Aave deployments.


Following the implementation of AIP-375 to increase stablecoin borrow rates across Aave V2 and V3 deployments, we continue to observe volatility in borrow rates across Aave deployments. As we highlighted in the recent proposal, we recommend a more aggressive increase of the Slope1 parameter to stabilize borrows under the UOptimal point.

Previous IR Curve modification impact analysis

Stablecoins Total Supply and Borrow: The data from the charts reflects an overall increase in both the supply and borrowing of stablecoins on the Ethereum V3 platform. From November 25th to December 12th we observed the following increases in supply and borrow across USDC, USDT, and DAI:

Asset Total Supply (M) - Nov 25 Total Supply (M) - Dec 12 Total Supply Increase (M) Supply Increase (%) Total Borrow (M) - Nov 25 Total Borrow (M) - Dec 12 Total Borrow Increase (M) Borrow Increase (%)
USDC 423 445 22 5.20% 378 406 28 7.40%
USDT 347 366 19 5.40% 265 332 67 25.20%
DAI 78 86 8 10.20% 70 79 9 12.80%
Total 848 897 49 20.80% 713 817 104 45.40%

We’ve observed an overall $49M increase (20.8%) in supply across USDC, USDT and DAI on Ethereum V3, and a $104M increase (45.4%) in borrows.
This general uptrend suggests that the AIP’s changes were well received, with higher utilization for the assets following the parameter updates.

Utilization Rate Analysis: Our continuous monitoring of the utilization rates post AIP-375, setting Slope1 at 5%, shows sustained demand. When looking at the percentage of times in which utilization was above UOptimal, we can see that the AIP-375 increase didn’t stabilize the utilization at or below the UOptimal. This could also be due to changing market dynamics with the recent increase in crypto asset prices.

During two distinct 16-day intervals, we observed the following:

  • Pre-AIP-375 Period (11.09.23 - 11.25.23)
  • Post-AIP-375 Period (11.25.23 - 12.12.23)

Percentage of Time of Utilization Above UOptimal:

Asset Before AIP-375 After AIP-375
USDC 69.53% 77.34%
USDT 63.02% 33.09%
DAI 48.70% 63.24%

The data demonstrates strong borrowing activity persisting after the interest rate curve adjustments, supporting a move towards higher interest rates. This pattern reflects a consistent, resilient demand among the top stablecoins on Ethereum V3.

Borrow Rate Analysis: After executing the previous proposal, we continue to observe fluctuations in borrow rates, suggesting the previous increase did not achieve the anticipated stabilization. This situation suggests that further adjustments of the interest rate parameters are necessary to achieve more consistent and stable borrowing rates.


Adjust Slope1 of stablecoins to 6%

The analysis indicates a necessity for further refinement of stablecoin interest rates, to achieve a more predictable and stable borrowing rate with an equilibrium utilization under the UOptimal point.
Therefore, we propose increasing Slope1 to 6% for stablecoins across all Aave deployments, in this iteration. Following this increase, we will continue monitoring the usage and equilibrium rate and make additional recommendations as necessary.


Market Asset Current Slope1 Rec Slope1
Ethereum V2 USDC 5% 6%
Ethereum V2 USDT 5% 6%
Ethereum V2 DAI 5% 6%
Ethereum V2 FRAX 5% 6%
Ethereum V2 sUSD 5% 6%
Ethereum V2 GUSD 5% 6%
Ethereum V2 LUSD 5% 6%
Ethereum V2 USDP 5% 6%
Ethereum V3 USDC 5% 6%
Ethereum V3 USDT 5% 6%
Ethereum V3 DAI 5% 6%
Ethereum V3 FRAX 5% 6%
Ethereum V3 LUSD 5% 6%
Avalanche V2 USDC 5% 6%
Avalanche V2 USDT 5% 6%
Avalanche V2 DAI 5% 6%
Avalanche V3 USDC 5% 6%
Avalanche V3 USDT 5% 6%
Avalanche V3 DAI 5% 6%
Avalanche V3 MAI 5% 6%
Avalanche V3 FRAX 5% 6%
Polygon V2 USDC 5% 6%
Polygon V2 USDT 5% 6%
Polygon V2 DAI 5% 6%
Polygon V3 USDC.e 7% No Change
Polygon V3 USDC 5% 6%
Polygon V3 USDT 5% 6%
Polygon V3 DAI 5% 6%
Polygon V3 MAI 5% 6%
Optimism V3 USDC.e 7% No Change
Optimism V3 USDC 5% 6%
Optimism V3 USDT 5% 6%
Optimism V3 DAI 5% 6%
Optimism V3 sUSD 5% 6%
Optimism V3 LUSD 5% 6%
Optimism V3 MAI 5% 6%
Arbitrum V3 USDC 5% 6%
Arbitrum V3 USDC.e 7% No Change
Arbitrum V3 USDT 5% 6%
Arbitrum V3 DAI 5% 6%
Arbitrum V3 LUSD 5% 6%
Arbitrum V3 FRAX 5% 6%
Arbitrum V3 MAI 5% 6%
Base V3 USDC 5% 6%
Base V3 USDbC 7% No Change
Metis V3 USDC 5% 6%
Metis V3 USDT 5% 6%
Gnosis V3 USDC 5% 6%
Gnosis V3 xDAI 5% 6%

Next Steps

  1. Following community feedback, submit the ARFC for a snapshot vote for final approval.
  2. If consensus is reached, submit an Aave Improvement Proposal (AIP) to implement the proposed updates.


Chaos Labs has not been compensated by any third party for publishing this ARFC.


Copyright and related rights waived via CC0


We have published a Snapshot for the community to vote on, starting in 24h.

We thank you in advance for your participation in the vote.


Gauntlet supports the proposed increase for slope1 from 5% to 6% for stablecoins across all Aave deployments.

High Utilization Rate

Stablecoin borrowing demand remains high and utilization has remained at Uopt after AIP-375. For USDC and USDT utilization rates on other markets, please find them on Gauntlet Risk Dashboard.

AAVE V3 Ethereum USDC
Screenshot 2023-12-19 at 2.11.39 PM

AAVE V3 Ethereum USDT
Screenshot 2023-12-19 at 2.12.42 PM
AAVE V3 Polygon USDC
Screenshot 2023-12-19 at 2.14.26 PM

AAVE V3 Polygon USDT
Screenshot 2023-12-19 at 2.13.54 PM

Comparison to Tradfi Rates

Comparison with Tradfi rates shows the current slope 1 for stablecoins remains less than the Federal Funds Rate of 5.33%.

Screenshot 2023-12-18 at 4.08.11 PM
Source: newyorkfed.org


We support increasing Slope1 to 6% for stablecoins across all Aave deployments.


We have updated the specification section to include several stablecoins that were not included in the original post, including:

  • Gnosis Chain stablecoins
  • DAI on Ethereum V2+V3
  • native USDC recently added to the Optimism, Polygon, and Base deployments.

The proposal to Onboard Native USDC to Aave V3 Markets increased slope1 for bridged USDC on Polygon, Arbitrum, Base and Optimism to 7%, intending to incentivize native USDC usage.

Therefore, we have updated the specification section above to exclude these assets from this proposal.


AIP-3 has been published for this proposal, with voting starting in less than 24h.

Thank you in advance for your participation in the vote.


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