Summary
Following the recent update to the protocol’s variable interest rate curves on Mainnet, we suggest implementing a similar update on Notional’s Arbitrum deployment. Specifically, the update aims to raise the target variable interest rates. Furthermore, this proposal involves altering the configuration of the variable interest rate curves to ensure a more gradual increase in variable rates between the kink1 and kink2 utilization rates.
Prime Cash Interest Rate Models
We propose increasing the kink2 interest rates for all currencies. Increasing the optimal interest rates will facilitate the variable lending experience for suppliers. We also propose increasing kink2 utilization rates by 5% for ETH and LSDs. We propose setting the kink1 utilization rates 20% below the kink2 utilization rates for all currencies. This will likely dampen the volatility in variable interest rates as utilization changes. We also propose increasing the maximum interest rate for stables from 100.5% to 150%. Fee parameters remain unchanged for all currencies.
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 | LSDs |
|---|---|---|---|
| kinkUtilization1 | 75 (75%) | 80 (80%) | 70 (70%) |
| kinkUtilization2 | 80 (80%) | 85 (85%) | 75 (75%) |
| kinkRate1 (1/256) | 5 (3.81%) | 10 (3.93%) | 2 (1.17%) |
| kinkRate2 (1/256) | 12 (9.14%) | 30 (11.78%) | 5 (2.93%) |
| maxRate25BPS | 255 (195%) | 192 (100.50%) | 225 (150%) |
| minFeeRate5BPS | 10 (0.50%) | 10 (0.50%) | 10 (0.50%) |
| maxFeeRate25BPS | 160 (40%) | 160 (40%) | 160 (40%) |
| feeRatePercent | 20 (20%) | 20 (20%) | 20 (20%) |
Proposed parameters
| Parameters | ETH | Stablecoins | LSDs |
|---|---|---|---|
| kinkUtilization1 | 65 (65%) | 65 (65%) | 60 (60%) |
| kinkUtilization2 | 85 (85%) | 85 (85%) | 80 (80%) |
| kinkRate1 (1/256) | 10 (7.62%) | 17 (9.96%) | 14 (8.20%) |
| kinkRate2 (1/256) | 33 (25.14%) | 33 (19.34%) | 33 (19.34%) |
| maxRate25BPS | 255 (195%) | 225 (150%) | 225 (150%) |
| minFeeRate5BPS | 10 (0.50%) | 10 (0.50%) | 10 (0.50%) |
| maxFeeRate25BPS | 160 (40%) | 160 (40%) | 160 (40%) |
| feeRatePercent | 20 (20%) | 20 (20%) | 20 (20%) |