[NIP-42] Update Prime Cash interest rate models - Arbitrum

Summary

In anticipation of the launch of ARB incentives on Notional V3 Arbitrum, we propose a set of parameter updates to increase the capital efficiency and utilization of the protocol’s variable rate markets. More specifically, we propose to increase the target interest rates in anticipation of higher borrowing demand. Additionally we propose updating the variable interest rate curves such that the variable rates increase more gradually before hitting the Kink2 utilization rate.

Prime Cash Interest Rate Models

We propose keeping kink2 utilization rates identical but increasing the kink1 utilization rates to 5% below the kink2 utilization rates. We also propose setting the current kinkRate2 rates as the new kinkRate1 rates. This will effectively shift the current target interest rates to utilization rates that are 5% lower than they currently are.

The proposed Prime Cash interest rate models can be visualized here. We present the breakdown of the proposed parameter changes for Prime Cash markets in the tables below:

Current parameters

Parameters ETH Stablecoins Liquid Staking Derivatives WBTC
kinkUtilization1 15 (15%) 10 (10%) 50 (50%) 15 (15%)
kinkUtilization2 80 (80%) 85 (85%) 75 (75%) 70 (70%)
kinkRate1 (1/256) 2 (1.52%) 6 (2.36%) 1 (0.59%) 1 (0.59%)
kinkRate2 (1/256) 5 (3.81%) 12 (4.71%) 2 (1.17%) 3 (1.76%)
maxRate25BPS 255 (195%) 192 (100.5%) 225 (195%) 225 (150%)
minFeeRate5BPS 10 (0.5%) 10 (0.5%) 10 (0.5%) 10 (0.50%)
maxFeeRate25BPS 160 (40%) 160 (40%) 160 (40%) 160 (40%)
feeRatePercent 20 (20%) 20 (20%) 20 (20%) 20 (20%)

Proposed parameters

Parameters ETH Stablecoins Liquid Staking Derivatives WBTC
kinkUtilization1 75 (75%) 80 (80%) 70 (70%) 65 (0.65%)
kinkUtilization2 80 (80%) 85 (85%) 75 (75%) 70 (70%)
kinkRate1 (1/256) 5 (3.81%) 10 (3.93%) 2 (1.17%) 3 (1.76%)
kinkRate2 (1/256) 12 (9.14%) 25 (9.81%) 5 (2.93%) 6 (3.52%)
maxRate25BPS 255 (195%) 192 (100.50%) 225 (150%) 225 (150%)
minFeeRate5BPS 10 (0.50%) 10 (0.50%) 10 (0.50%) 10 (0.50%)
maxFeeRate25BPS 160 (40%) 160 (40%) 160 (40%) 160 (40%)
feeRatePercent 20 (20%) 20 (20%) 20 (20%) 20 (20%)

Resources

1 Like

We are aligned with these updates and voted accordingly. Separately, but one thing that might be helpful is a way to view current utilization rates directly on market pages similar to how Aave displays utilization rates like this (just a familiar UX). If this already exists and we are just missing it, please feel free to share the link!

1 Like