Summary
We propose to change the Prime Cash interest rate models on Notional with the aim of increasing stablecoin interest rates in response to rapidly shifting market conditions and significantly increased demand for leverage.
Proposed Changes
Increase Kink2 rates for stablecoins.
- Current Issue: The interest rates at the current kink are not sufficiently attractive to potential depositors.
- Proposal: Raise the target (kink2) rates to make it possible for interest rates to sit at sustainably higher levels (below kink2).
- Expected Outcome: Higher kink2 rates will make it easier to attract depositors in the event that attractive leveraged yield strategies produce additional borrowing 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 | No Change | 7.85% → 9.42% | 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) | 18 (7.07%) | 24 (9.42%) | 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.