[ARFC] Ethereum v2 Reserve Factor Adjustment


title: [ARFC] Ethereum v2 Reserve Factor Adjustment
author: @karpatkey_TokenLogic @ChaosLabs
created: 2024-02-27


Summary

This publication proposes periodically increasing the Aave v2 Ethereum Reserve Factor (RF) to encourage users to migrate to Aave v3.

Motivation

With Aave v3 now crossing the $8 Billion TVL threshold and $3 Billion remaining in Aave v2, this publication seeks to encourage users to migrate from v2 to v3 by increasing the RF.

With all other variables held constant, increasing the RF over time in isolation will result in a reducing deposit rate. Users are encourage to migrate to v3 in search of higher yield.

With market conditions permitting, we propose initiating a periodic 5.00% RF increase across all assets every 14 days as mentioned here up to a threshold of 99.99%. During each increase cycle, we will monitor how users respond and, if any potential risks are identified, the next RF increase will be delayed until it is safe to implement.

Do note increasing the RF parameter does not directly affect users’ health factor, and this method has already been implemented on Polygon v2 for some time.

Specification

The below shows the current and proposed RF for each reserve.

Asset Current RF Recommended RF
1INCH 99.00% 99.99%
AMPL 99.90% 99.99%
BUSD 99.90% 99.99%
BAL 99.00% 99.99%
BAT 99.00% 99.99%
CRV 99.00% 99.99%
CVX 99.00% 99.99%
DAI 25.00% 30.00%
DPI 99.00% 99.99%
ENS 99.00% 99.99%
ENJ 99.00% 99.99%
FEI 99.00% 99.99%
FRAX 30.00% 35.00%
GUSD 20.00% 25.00%
KNC 99.00% 99.99%
LINK 30.00% 35.00%
LUSD 25.00% 30.00%
MANA 99.00% 99.99%
MKR 99.00% 99.99%
RAI 99.00% 99.99%
REN 99.00% 99.99%
renFIL 35.00% 99.99%
SNX 99.00% 99.99%
sUSD 30.00% 35.00%
SUSHI 99.00% 99.99%
TUSD 99.00% 99.99%
UNI 99.00% 99.99%
USDC 25.00% 30.00%
USDP 20.00% 25.00%
USDT 25.00% 30.00%
UST 99.00% 99.99%
wBTC 30.00% 35.00%
wETH 25.00% 30.00%
YFI 99.00% 99.99%
ZRX 99.00% 99.99%

Upon implementing this proposal, a subsequent AIP will be submitted every 2 weeks that increases the RF by 5.00% up to a maximum of 99.99%, subject to market conditions.

Disclosure

TokenLogic, karpatkey and Chaos Labs receive no payment for this proposal. TokenLogic and karpatkey are both delegates within the Aave community.

Next Steps

  1. Gather feedback from the community.
  2. If consensus is reached on this ARFC, escalate this proposal to the Snapshot stage.
  3. If Snapshot outcome is YAE, escalate this proposal to AIP stage
  4. Subsequent AIP submission are expected to follow every 14 days thereafter

Copyright

Copyright and related rights waived via CC0.

2 Likes

please explain how increasing reserve factor helps migrate users. thank you.

A Snapshot vote has been created, here.

Start date Mar 5, 2024, 8:09 PM
End date Mar 8, 2024, 8:09 PM

Hey,

The next update will bring the reserve factors to:

Asset Previous Reserve Factor New Reserve Factor
DAI 30.00% 35.00%
FRAX 35.00% 40.00%
GUSD 25.00% 30.00%
LINK 35.00% 40.00%
LUSD 30.00% 35.00%
sUSD 35.00% 40.00%
USDC 30.00% 35.00%
USDP 25.00% 30.00%
USDT 30.00% 35.00%
WBTC 35.00% 40.00%
WETH 30.00% 35.00%

We will be submitting this AIP for voting on March 25th.

1 Like

Following up on this: is it because lenders start getting lower yield and are incentivised to migrate?

Hey,

The next update will bring the reserve factors to:

Asset Previous Reserve Factor New Reserve Factor
DAI 35.00% 40.00%
FRAX 40.00% 45.00%
GUSD 30.00% 35.00%
LINK 40.00% 45.00%
LUSD 35.00% 40.00%
sUSD 40.00% 45.00%
USDC 35.00% 40.00%
USDP 30.00% 35.00%
USDT 35.00% 40.00%
WBTC 40.00% 45.00%
WETH 35.00% 40.00%

We will be submitting this AIP for voting on April 8th.

1 Like

gm,

The next update will bring the reserve factors to:

Asset Previous Reserve Factor New Reserve Factor
DAI 40.00% 45.00%
FRAX 45.00% 50.00%
GUSD 35.00% 40.00%
LINK 45.00% 50.00%
LUSD 40.00% 45.00%
sUSD 45.00% 50.00%
USDC 40.00% 45.00%
USDP 35.00% 40.00%
USDT 40.00% 45.00%
WBTC 45.00% 50.00%
WETH 40.00% 45.00%

We will be submitting this AIP for voting on April 22nd.

gm,

The next update will bring the reserve factors to:

Asset Previous Reserve Factor New Reserve Factor
DAI 45.00% 50.00%
FRAX 50.00% 55.00%
GUSD 40.00% 45.00%
LINK 50.00% 55.00%
LUSD 45.00% 50.00%
sUSD 50.00% 55.00%
USDC 45.00% 50.00%
USDP 40.00% 45.00%
USDT 45.00% 50.00%
WBTC 50.00% 55.00%
WETH 45.00% 50.00%

We will be submitting this AIP for voting on May 7th.

1 Like

@karpatkey_TokenLogic
It would be great to see an update / analysis on the following:

  1. The impact increasing RF has had on on these assets’ supply and borrow positions
  2. How many of these positions are flowing to the V3 market vs. other lending protocols

I know the goal here is:

and it would be prudent to check our assumptions here.

1 Like

gm,

The next update will bring the reserve factors to:

Asset Previous Reserve Factor New Reserve Factor
DAI 50.00% 55.00%
FRAX 95.00% 99.99%
GUSD 95.00% 99.99%
LINK 55.00% 60.00%
LUSD 95.00% 99.99%
sUSD 95.00% 99.99%
USDC 50.00% 55.00%
USDP 95.00% 99.99%
USDT 50.00% 55.00%
WBTC 55.00% 60.00%
WETH 50.00% 55.00%

We will be submitting this AIP for voting on May 24th.

1 Like

This topic was automatically closed 30 days after the last reply. New replies are no longer allowed.

The next update will bring the reserve factors to:

Market Asset Current RF New RF
Ethereum V2 DAI 55% 60%
Ethereum V2 LINK 60% 65%
Ethereum V2 USDC 55% 60%
Ethereum V2 USDT 55% 60%
Ethereum V2 WBTC 60% 65%
Ethereum V2 WETH 55% 60%
1 Like

The next update will bring the reserve factors to:

Asset Market Current RF Proposed RF
DAI Ethereum v2 60.00% 65.00%
LINK Ethereum v2 65.00% 70.00%
USDC Ethereum v2 60.00% 65.00%
USDT Ethereum v2 60.00% 65.00%
wBTC Ethereum v2 65.00% 70.00%
wETH Ethereum v2 60.00% 65.00%
1 Like