# \[ARFC\] wMATIC Interest Rate Update

**URL:** <https://governance.aave.com/t/arfc-wmatic-interest-rate-update/15309>\
**Category:** Governance\
**Created:** [November 2, 2023, 8:44am UTC](https://governance.aave.com/t/arfc-wmatic-interest-rate-update/15309 "2023-11-02T08:44:56Z")\
**Posts on this page:** 1\
**Showing post:** 2

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**Author:** ![Gauntlet](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/gauntlet/32/4064_2.png) [@Gauntlet](https://governance.aave.com/u/Gauntlet)\
**Post date:** [November 2, 2023, 7:48pm UTC](https://governance.aave.com/t/arfc-wmatic-interest-rate-update/15309/2 "2023-11-02T19:48:54Z")

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Thanks for pushing this forward, @TokenLogic. Gauntlet supports these recommendations to lower slope 1 for WMATIC. Much of our reasoning remains similar to [before](https://governance.aave.com/t/gauntlet-interest-rate-recommendations-for-weth-and-wmatic-on-v2-and-v3/14588/7), we encourage the community to check out our previous analysis for more detail.

At a high level, lowering slope 1 for WMATIC may help to

- Increase WMATIC borrowing and utilization
- Incentivizing MATIC LST collateralized recursive borrowing by facilitating profitability
- Lower risks associated with increased stablecoin borrowing against LST collateral, amidst lower MATIC LST liquidity

Back in September, we delayed our original recommendation to lower Slope 1 to 4.3% due to utilization spiking to Uopt. Decreasing slope 1 when utilization is at Uopt was unlikely to increase borrows further.

 ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/4d48e755af3b32f1f89de8cb6de259305d831b2a.jpeg)

### Additional recommendations

**We also recommend an option 2 to lower slope 1 to 4.3% to allow profitable recursive loops across both MaticX (~4.85% APR) and stMATIC (~4.3% APR) when utilization = Uopt.**

- High spread between MaticX yield with stMATIC yield may cause equilibrium borrow rates for slope 1 = 5% to be higher than stMATIC yield.
- As a result, lowering slope 1 to 4.3% may help increase recursive borrowing for stMATIC collateral more so than setting slope 1 to 5%.
- Facilitating profitable recursive loops for stMATIC collateral reduces its risk profile.

From a protocol revenue perspective,

- Compared to current WMATIC IR parameters, this option generates more borrow revenue should WMATIC utilization increase \> 69%
- Compared to slope 1 of 5%, assuming equilibrium borrow rates of 4.7%, this option generates slightly less borrow revenue (~$20k annualized) at utilization = Uopt

This option continues to preserve considerable supplier advantage on v3 Polygon relative to v2 Polygon for WMATIC (1.7% to 0.5% APR), so we do not expect to see reverse migration of WMATIC back to v2.

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_[View the full topic](https://governance.aave.com/t/arfc-wmatic-interest-rate-update/15309)._