last week the Fed raised interest rates to 5.5% meanwhile Rate Slope 1 for most stable coins is 3.5-4% and the Optimal Usage for these markets is passed regularly (at the time of writing DAI costs 30.21% to barrow USDC 74.32% and USDT 105.77%). The DAO needs to make changes to account for the higher interest rate environment we’re in.
In the short term, Rate Slope 1 for all stablecoin markets should be raised to 6-6.5%. In the long term, upgrades should be made to the protocol to allow users to access external yield. For example, the DAI DSR is at 3.19% and is going to go to 8% soon Maker Governance - Stability Scope Bootstrapping Edits - July 24, 2023, also there is a big push to bring treasury yields on chain How Big Banks Like JPMorgan And Citi Want To Put Wall Street On A Blockchain - YouTube. The protocol needs to reflect the coming reality that there is an opportunity cost to lending out funds by allowing some user deposits to be put into these yield-bearing mechanisms.
Hello, that’s not a governance proposal, so move this post to “other” section.
What you say has merits but the market does work like this, there’s simply a low appetite to use crypto as collateral right now, and tinkering with rate curves will not change this.
And why is there a low appetite to use crypto (I assume you mean stable coins) right now?
Why would you use stablecoins right now? Think about yourself and you will get the answer quick.
Because nobody needs them atm. You cannot farm like you could back in 2020.
There are still lots of opportunities to earn yield on stablecoins, it’s just most are not as good as t-bills. Why would someone put money into Aave to earn 3.5-4% when they can put it into a stock brokerage and earn 5.5%?
See you answered it. As long as Tradfi is offering better yield people will stay there. As soon as defi will offer better risk free yield or at least interest rates so high people risk it, we will see demand.
This will only happen as soon as the FED will lower interest rates which won’t happen this year nor fast in any way. So you will have to wait until at least 2024 when inflation is going down and interest rates too.
so do you agree that Rate Slope 1 for stablecoin markets should be raised?
No, not at all. Doesn’t make sense.
I don’t really understand your point of view, I think it’s bad UX for interest rates to be as volatile as it has been recently.
closing topic, this is not a proposal and the forum is not the right medium for chit chat, you’re welcome to join the discord for having discussions with the community.