title: Risk Stewards - USDS Borrow Rate Update Prime Instance
author: @TokenLogic
created: 2025-04-29
Summary
This publication proposes to update the borrow rate model for USDS on the Prime instance Aave.
These changes are required to enable shifting towards a targeted borrow rate through the introduction of automated liquidity management from the Spark team.
Motivation
Currently, users seeking to borrow large amounts of USDS are reluctant to do so unless they can observe sufficient available liquidity without triggering significant increases in borrowing rates. Under the present model, Spark’s automation targets an effective borrow rate of ~5.25%, which leads to an equilibrium utilization ratio of approximately 89.5%. Consequently, only ~2.5% of total USDS supply remains available before rates increase sharply.
To create a more user-friendly market structure and encourage large borrow actions, this proposal seeks to lower the equilibrium utilization to approximately 69%. This results in 23% of the reserves liquidity being available for borrowers to access without causing the utilisation to extend beyong the Uoptimal.
Adjusting the base rate upwards and reducing the first slope will allow Spark’s liquidity layer to maintain its target borrow rate at a lower utilization ratio, thus enhancing visible liquidity without materially impacting borrowing costs at the optimal point.
Specification
The borrow rate parameters for Prime USDS will be updated as follows:
| Parameter | Current Value | Proposed Value |
|---|---|---|
| Base | 0.75% | 4.5% |
| Uoptimal | 92% | 92% |
| Slope 1 | 4.5% | 1% |
| Slope 2 | 35% | 35% |
With the new model:
- The effective borrow rate at 69% utilization will match Spark’s target (~5.25%).
- Approximately 23% of market supply will be available as resting liquidity (~13.8 million USDS based on 60 million supply).
- The borrow rate at the optimal utilization point (92%) will only be marginally higher than the current structure.
These changes will be implemented by updating the Prime USDS interest rate strategy contractthe Risk Stewards gradually over the coming days/weeks.
Disclosure
TokenLogic does not receive any payment for this proposal.
Next Steps
- Risk Stewards are to progressively implement the proposal outlined above.
Copyright
Copyright and related rights waived via CC0.
