Summary
LlamaRisk recommends adjusting the interest rate curve on the three stablecoin reserves of Aave V3 Monad.
- Increase optimal utilization for USDC from 90.00% to 92.00% and reduce Slope2 from 40.00% to 20.00%.
- Increase optimal utilization for USDT0 from 90.00% to 92.00% and reduce Slope2 from 40.00% to 20.00%.
- Increase optimal utilization for GHO from 90.00% to 92.00% and reduce Slope2 from 40.00% to 20.00%.
Motivation
USDC and USDT0 on Aave V3 Monad have experienced periods of elevated utilization, with both reserves exceeding the current 90.00% optimal utilization threshold over the past 30 days. These excursions resulted in variable borrow APYs reaching 12.36% for USDC and 20.35% for USDT0, reflecting the sharp rate increase under the current 40% Slope 2 configuration.
The steep Slope 2 creates a strong rate response once utilization exceeds the optimal point, which can lead to disproportionately high borrowing costs during temporary utilization spikes. This risk is amplified by the relatively concentrated supply across all three reserves, where withdrawals by large suppliers can quickly increase utilization without a corresponding increase in borrow demand. Raising the optimal utilization ratio to 92.00% and reducing Slope 2 to 20.00% would provide additional borrowing capacity while moderating these rate spikes, reducing the full-utilization variable borrow rate from 44.00% to 24.00%.
Interest Rate Changes
The proposed configuration raises optimal utilization from 90% to 92% and reduces Slope2 from 40% to 20% across USDC, USDT0, and GHO, while baseVariableBorrowRate and Slope1 remain unchanged. As a result, the borrow APR declines across all three reserves, with the largest reductions occurring during periods of elevated utilization.
- USDC: Current utilization is 89.9%, with the borrow APR declining from 4.00% to 3.91% under the proposed curve. Utilization averaged 86.2%, ranging from 63.3% to 97.5%. At the 97.5% peak, the borrow APR would have declined from 34.00% to 17.75%.
- USDT0: Current utilization is 85.9%, with the borrow APR declining from 3.82% to 3.74%. Utilization averaged 77.9%, ranging from 34.2% to 99.9%. At the 99.9% peak, the borrow APR would have declined from 43.60% to 23.75%.
- GHO: Current utilization is 79.1%, with the borrow APR declining from 3.52% to 3.44%. Utilization averaged 60.6%, ranging from 40.0% to 94.9%. At the 94.9% peak, the borrow APR would have declined from 23.60% to 11.25%.
At the optimal utilization, the recommended configuration also results in a modest increase in supply APR for all three assets, from 3.24% to 3.31%, as the higher optimal utilization allows a greater share of supplied liquidity to be borrowed.
Source: IRM Changes, LlamaRisk, August 13, 2026
Borrow Capacity and Exit Buffer
Raising the optimal utilization point from 90% to 92% shifts 2% of each reserve’s supply from the withdrawal buffer into borrowable capacity priced on Slope1. These are two sides of the same adjustment: every dollar of additional borrowing capacity below the optimal point represents a dollar less of liquidity available for withdrawal when the reserve reaches that point.
At current supply levels, the change adds approximately $6.13M of borrowable capacity across the three reserves. This will reduce the available liquidity buffer from 10% to 8% of supply, representing a 20% relative reduction in the withdrawal buffer.
| Instance | Asset | Available Liquidity | Current Buffer | New Buffer | Reduction |
|---|---|---|---|---|---|
| Aave V3 Monad | USDC | 13,735,883 | 13,330,059 | 10,664,047 | 2,666,012 |
| Aave V3 Monad | USDT0 | 22,624,322 | 15,958,982 | 12,767,186 | 3,191,796 |
| Aave V3 Monad | GHO | 2,873,744 | 1,376,455 | 1,101,164 | 275,291 |
At the same time, reducing Slope2 lowers borrowing costs once utilization exceeds the optimal point, thereby reducing the cost of restoring the liquidity buffer. This benefits existing borrowers by lowering their funding costs and improving their ROI during periods of elevated utilization. At the highest observed utilization spikes, the proposed Slope2 would have reduced borrow rates from 12.36% to 4.27% for USDC and from 20.35% to 9.26% for USDT0.
Supplier Concentration
Supply is concentrated across all three reserves, with the largest position exceeding the liquidity available at the optimal point under both the current and recommended configurations. The proposed change, therefore, does not introduce a new concentration risk but reduces the buffer against an already existing one.
| Instance | Asset | Suppliers | Largest Position | Largest Share | Top Five Share | Share Held Without Debt |
|---|---|---|---|---|---|---|
| Aave V3 Monad | USDC | 823 | 60,505,468 | 45.4% | 67.8% | 78.4% |
| Aave V3 Monad | USDT0 | 268 | 47,943,905 | 30.0% | 65.7% | 88.9% |
| Aave V3 Monad | GHO | 75 | 6,027,258 | 43.0% | 81.6% | 97.8% |
The share held without debt represents the supply held by wallets with no borrowings in the market. This is the relevant pool when assessing withdrawal risk, as these suppliers can exit without first repaying debt or releasing collateral. Under the recommended configuration, the largest position represents 5.7x the USDC buffer, 3.8x the USDT0 buffer, and 5.5x the GHO buffer, compared with 4.5x, 3.0x, and 4.4x today.
The largest USDC position and the largest USDT0 position belong to the same address, which carries no debt in the market. Withdrawal capacity from those two reserves is therefore not independent, and a coordinated exit would draw on both buffers simultaneously.
Source: LlamaRisk, August 13, 2026
For suppliers, the change has different effects depending on utilization. At the optimal point, the recommended configuration slightly increases the supply APR from 3.24% to 3.31% as more of the reserve is lent out. Above the optimal point, however, supply APR is materially lower, falling from 20.52% to 9.83% at 95% utilization and from 39.60% to 21.60% at 100% utilization.
Source: LlamaRisk, August 13, 2026
Given that recent utilization excursions were brief and self-correcting, the Slope2 appears reasonable, but the configuration should be revisited if utilization persistently remains above the optimal point.
Specification
| Instance | Asset | Current Optimal Utilization | Recommended Optimal Utilization | Current Slope 2 | Recommended Slope 2 |
|---|---|---|---|---|---|
| Aave V3 Monad | USDC | 90.00% | 92.00% | 40.00% | 20.00% |
| Aave V3 Monad | USDT0 | 90.00% | 92.00% | 40.00% | 20.00% |
| Aave V3 Monad | GHO | 90.00% | 92.00% | 40.00% | 20.00% |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
Disclosure
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.