Summary
In reaction to current market conditions and declining demand for leverage, we propose a decrease in the target interest rates for Prime Cash on Notional Finance.
Proposal
The recent market downturn has caused significant liquidations and has depressed token prices across the ecosystem. This has led to lower yields and borrow rates on competing lending protocols as well as significantly lower yields available to leveraged vault users on Notional.
We believe this suggests that we should lower kink2 rates on Notional’s variable rate lending markets significantly to bring them in line with the market and reduce the cost of borrowing such that leveraged yield strategies can remain profitable and we can achieve greater utilization on our lending markets.
We propose the following prime cash lending market parameters by token category, effective on both Mainnet and Arbitrum:
| Parameters | ETH | Stablecoins | LSDs | wBTC |
|---|---|---|---|---|
| kinkUtilization1 | 75 (75%) | 80 (80%) | 70 (70%) | 65 (65%) |
| kinkUtilization2 | 80 (80%) | 85 (85%) | 75 (75%) | 70 (70%) |
| kinkRate1 (1/256) | 3 (2.29%) | 10 (3.93%) | 2 (1.17%) | 1 (0.59%) |
| kinkRate2 (1/256) | 8 (6.09%) | 18 (7.07%) | 5 (2.93%) | 4 (2.34%) |
| maxRate25BPS | 255 (195%) | 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%) |
These changes represent a significant decrease in target prime cash interest rates. You can see the change from the current parameters here:
Kink rate changes Mainnet:
| Parameters | ETH | Stablecoins | LSDs | wBTC |
|---|---|---|---|---|
| kinkRate1 (1/256) | 7.62% → 2.29% | 9.96% → 3.93% | 4.1% → 1.17% | 1.76% → 0.59% |
| kinkRate2 (1/256) | 25.14% → 6.09% | 29.88% → 7.07% | 16.41% → 2.93% | 3.52% → 2.34% |
Kink rate changes Arbitrum:
| Parameters | ETH | Stablecoins | LSDs | wBTC |
|---|---|---|---|---|
| kinkRate1 (1/256) | 7.62% → 2.29% | 9.96% → 3.93% | 8.2% → 1.17% | 1.76% → 0.59% |
| kinkRate2 (1/256) | 25.14% → 6.09% | 19.34% → 7.07% | 19.34% → 2.93% | 3.52% → 2.34% |