[ARFC] Stablecoin IR Curve Amendment on Aave V2 and V3 - 04/22/2024


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


Following the anticipated decrease in DSR—from 13% to 10%—we believe it is prudent to update Aave stablecoin interest rates to best align with the broader market. Previously, we recommended increasing both UOptimal and Slope1 for stablecoins to reduce rate volatility. This recommendation was amended on the news of the DSR increase from 5% to 15%.

Untitled - 2024-04-22T155727.548

The new parameters went into effect on April 4, 2024, and thus far have helped improve rate stability and utilization rates. As part of our ongoing monitoring of broader markets, we note that MakerDAO is in the process of reducing the DAI Savings Rate, which could impact stablecoin rates throughout DeFi.

Following our methodology laid out in previous recommendations, we recommend more closely aligning Slope1 with the DSR to reduce the opportunity of rate arbitrage and ensure that borrow rates remains competitive. As a result, we propose decreasing Slope1 by an equivalent amount from 12% to 9%.


  1. We do not recommend an update to the following assets on lower-cap stablecoins on Ethereum V2, as they are currently being deprecated.
  2. Similar to the previous proposals, we recommend bridged USDC.e on all deployments to have a 1% higher slope1 to motivate the borrowing of native USDC.


Market Asset Current Slope1 Recommended Slope1
Ethereum V2 USDC 12% 9%
Ethereum V2 USDT 12% 9%
Ethereum V2 DAI 12% 9%
Ethereum V2 FRAX 12% No Change
Ethereum V2 sUSD 12% No Change
Ethereum V2 GUSD 12% No Change
Ethereum V2 LUSD 12% No Change
Ethereum V2 USDP 12% No Change
Ethereum V3 USDC 12% 9%
Ethereum V3 USDT 12% 9%
Ethereum V3 FRAX 12% 9%
Ethereum V3 DAI 12% 9%
Ethereum V3 LUSD 12% 9%
Ethereum V3 pyUSD 12% 9%
Ethereum V3 crvUSD 12% 9%
Avalanche V2 USDC.e 13% 10%
Avalanche V2 USDT 12% 9%
Avalanche V2 DAI 12% 9%
Avalanche V3 USDC 12% 9%
Avalanche V3 USDT 12% 9%
Avalanche V3 DAI 12% 9%
Avalanche V3 MAI 12% 9%
Avalanche V3 FRAX 12% 9%
Polygon V2 USDC 12% 9%
Polygon V2 USDT 12% 9%
Polygon V2 DAI 12% 9%
Polygon V3 USDC 12% 9%
Polygon V3 USDT 12% 9%
Polygon V3 DAI 12% 9%
Polygon V3 MAI 12% 9%
Polygon V3 EURA 12% 9%
Polygon V3 EURS 12% 9%
Polygon V3 jEUR 12% 9%
Polygon V3 USDC.e 13% 10%
Optimism V3 USDC 12% 9%
Optimism V3 USDT 12% 9%
Optimism V3 DAI 12% 9%
Optimism V3 sUSD 12% 9%
Optimism V3 LUSD 12% 9%
Optimism V3 MAI 12% 9%
Optimism V3 USDC.e 13% 10%
Arbitrum V3 USDC 12% 9%
Arbitrum V3 USDC.e 13% 10%
Arbitrum V3 USDT 12% 9%
Arbitrum V3 DAI 12% 9%
Arbitrum V3 LUSD 12% 9%
Arbitrum V3 FRAX 12% 9%
Arbitrum V3 MAI 12% 9%
Arbitrum V3 EURS 12% 9%
Base V3 USDbC 13% 10%
Base V3 USDC 12% 9%
Metis V3 m.USDC 6% No Change
Metis V3 m.USDT 6% No Change
Metis V3 m.DAI 6% No Change
BNB Chain V3 USDT 12% 9%
BNB Chain V3 USDC 12% 9%
BNB Chain V3 FDUSD 12% 9%
Scroll V3 USDC 12% 9%
Gnosis V3 WXDAI 12% 9%
Gnosis V3 USDC 12% 9%
Gnosis V3 EURe 12% 9%

Next Steps

  1. Following community feedback, submit an Aave Improvement Proposal (AIP) to implement the proposed updates.
  2. We believe this adjustment will align the protocol’s rates more closely with current market conditions and borrower behavior. Based on the outcomes, potential future steps include:
    • Further adjustment of Slope 1: Depending on the market’s and community’s response to the initial adjustment, additional adjustments in Slope1 could be considered to optimize the IR curves further.

As always, our priority remains to monitor these developments closely and provide timely, data-driven recommendations to maintain Aave’s competitive edge and market responsiveness.


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


Copyright and related rights waived via CC0


Is this proposal progressing to AIP?

Looking at the votes it passed the threshold of YES. So it’s gonna be implemented soon.

Hey @graadient, the proposal for the Stablecoin IR Updates has been executed.