Simple Summary

A proposal to decrease stablecoin Interest Rate parameters across all Aave deployments.

Motivation

Following the anticipated decrease in DSR—from 13% to 10%—we believe it is prudent to update Aave stablecoin interest rates to best align with the broader market. Previously, we recommended increasing both UOptimal and Slope1 for stablecoins to reduce rate volatility. This recommendation was amended on the news of the DSR increase from 5% to 15%.

The new parameters went into effect on April 4, 2024, and thus far have helped improve rate stability and utilization rates. As part of our ongoing monitoring of broader markets, we note that MakerDAO is in the process of reducing the DAI Savings Rate, which could impact stablecoin rates throughout DeFi.

Following our methodology laid out in previous recommendations , we recommend more closely aligning Slope1 with the DSR to reduce the opportunity of rate arbitrage and ensure that borrow rates remains competitive. As a result, we propose decreasing Slope1 by an equivalent amount from 12% to 9%.

Caveats:

1. We do not recommend an update to the following assets on lower-cap stablecoins on Ethereum V2, as they are currently being deprecated.
2. Similar to the previous proposals, we recommend bridged USDC.e on all deployments to have a 1% higher slope1 to motivate the borrowing of native USDC.

Specification

References

• Implementation: AaveV2Ethereum, AaveV2Avalanche, AaveV3Ethereum, AaveV3Polygon, AaveV3Avalanche, AaveV3Optimism, AaveV3Arbitrum, AaveV3Base, AaveV3Gnosis, AaveV3Scroll, AaveV3BNB
• Tests: AaveV2Ethereum, AaveV2Avalanche, AaveV3Ethereum, AaveV3Polygon, AaveV3Avalanche, AaveV3Optimism, AaveV3Arbitrum, AaveV3Base, AaveV3Gnosis, AaveV3Scroll, AaveV3BNB
• Snapshot: Direct-to-AIP
• Discussion

Copyright

Copyright and related rights waived via CC0.