Simple Summary

Gauntlet proposes adjusting interest rate parameters for the Ethereum, Polygon, and Avalanche Aave V2 markets. Tokens impacted include USDP, FRAX, USDT, GUSD, WETH, WBTC, WAVAX, and WMATIC. Forum post can be found here.

Abstract

Given the significant shifts in crypto markets, Gauntlet’s platform has evaluated all assets on Aave V2's Ethereum, Polygon, and Avalanche markets and has identified opportunities to adjust parameters for certain assets for the benefit of the protocol. Last November, we proposed interest rate curve changes for the Aave V2 Ethereum market using our interest rate curve optimization framework. Our methodology makes data-informed decisions around setting borrower and supplier interest rates when market conditions require the protocol to reduce risk or when strategic opportunities present themselves to increase protocol revenue without materially impacting risk. This analysis further finetunes the interest rate curves of Aave V2 Ethereum, and extends our methodology to Polygon and Avalanche.

Objectives

Among other factors, there are two primary reasons to adjust an interest rate curve:

1. mitigate the risk of 100% utilization in a pool
2. build reserves via protocol revenue to cover insolvencies or other expenses in the future

As a secondary objective, we want to optimize the user experience of Aave's borrowers and suppliers.

Specification

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.