@LlamaRisk and others
While the rsETH freeze and bad debt handling are the immediate focus, the secondary liquidity crunch in stablecoin pools (especially USDC on Ethereum Core) continues to trap billions in user funds.
Stablecoin utilization has remained pinned near 100% for days, with available liquidity near zero and withdrawals severely restricted for many LPs — even as borrow rates sit around 14%.
I’ve posted a detailed discussion note with concrete parameter options to fix this:
[ARFC] Improve Liquidity Buffer for USDC on Ethereum Core – Raise Slope 2, lower optimal utilization → [Link]
It proposes:
- Lowering optimal utilization from 92% → 87% (interim) / 85% (target) for a larger liquidity buffer
- Raising base Slope 2 from 10% → 40% (interim) / 50% (target) to make the curve more effective at attracting new supply under stress
The goal is simple: let the interest rate model do what it was designed for — clear the market quickly by drawing in fresh capital when utilization spikes, instead of leaving LPs stuck.
Happy to iterate on the numbers. Would welcome LlamaRisk’s view on whether a Risk Steward action could help resolve this faster while the broader incident is managed.
Thanks for the ongoing work during a tough period.