[ARFC] Gauntlet Interest Rate Recommendation for WETH

Summary

A proposal to make parameter changes on Ethereum v3 and v2, Optimism v3, Arbitrum v3, Polygon v3. For more details, see the full forum post here.

Motivation

Gauntlet’s analysis has identified opportunities to adjust interest rate parameters for WETH on Ethereum v3, Optimism v3, Arbitrum v3, Polygon v3. This will help to facilitate more Emode borrowing against LST collateral, which may

• drive additional revenue to Aave.
• adjust current risk profile for LST to depend less on onchain liquidity, which has been steadily declining over the past few months. This may be adding risk to the current borrow composition against LST collateral.

Specification

Option	Description	Recommendation
1	Lower slope 1 below staking yield	Lower slope 1 on all v3 to 3.3%
2	Match v3 Ethereum	Remove base rate of 1% on all v3, excl Ethereum v3
3	Not recommended	No change

Disclaimer: Gauntlet reserves the right to not move forward with any parameter changes recommended in Snapshot polls, if market conditions change meaningfully.

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.