Summary
We propose to change the Prime Cash interest rate models on Notional with the aim of decreasing stablecoin and eth interest rates in response to shifting market conditions and decreased demand for leverage.
Proposed Changes
Increase Kink2 rates for stablecoins.
- Current Issue: Interest rates are restrictive relative to available yields across DeFi.
- Proposal: Lower the target (kink2) rates to make it possible for interest rates to sit at sustainably higher utilization levels (below kink2).
- Expected Outcome: Lower kink2 rates will better balance supply and demand.
Proposed Parameter Changes
| Parameters | ETH | Stablecoins | LSDs | wBTC |
|---|---|---|---|---|
| Kink Utilization 1 | No Change | No Change | No Change | No Change |
| Kink Utilization 2 | No Change | No Change | No Change | No Change |
| Kink Rate 1 | No Change | No Change | No Change | No Change |
| Kink Rate 2 | 7.07% → 4.71% | 10.99% → 9.03% | No Change | No Change |
| Max Rate | No Change | No Change | No Change | No Change |
New Parameters
| Parameters | ETH | Stablecoins | LSDs | wBTC |
|---|---|---|---|---|
| kinkUtilization1 | 75 (75%) | 75 (75%) | 55 (55%) | 55 (55%) |
| kinkUtilization2 | 90 (90%) | 92 (92%) | 80 (80%) | 70 (70%) |
| kinkRate1 (1/256) | 6 (2.36%) | 10 (3.93%) | 1 (0.59%) | 1 (0.59%) |
| kinkRate2 (1/256) | 12 (4.71%) | 23 (9.03%) | 6 (3.52%) | 6 (3.52%) |
| maxRate25BPS | 192 (100.5%) | 192 (100.5%) | 225 (150%) | 225 (150%) |
| feeRatePercent | 20 (20%) | 20 (20%) | 20 (20% | 20 (20% |
| minFeeRate5BPS | 10 (0.50%) | 10 (0.50%) | 10 (0.50%) | 10 (0.50%) |
| maxFeeRate25BPS | 160 (40%) | 160 (40%) | 160 (40%) | 160 (40%) |
Conclusion
By implementing this change, we aim to enhance deposit growth and make Notional’s stablecoin markets more competitive for lenders.