[ARFC] wMATIC Interest Rate Update
title: [ARFC] wMATIC Interest Rate Update author: @TokenLogic - @MatthewGraham & @defijesus created: 2023-11-02
Summary
This publication proposes revising the wMATIC interest rate from 6.10% to 5.00% Aave v3 Polygon.
Motivation
Following on from previous discussions to reduce the wMATIC interest rate, here. This publication proposes reducing the Slope1 parameter from 6.10% to 5.00%. The 5.00% Slope1 parameter marginally exceeds the the current borrow rate and the two dominants LST APRs.
v3 wMATIC Borrow Rate: 4.74% APY (at time of writing) MaticX APR: 4.68% stMATIC APR: 4.30%
With the current borrowing rate for wMATIC, 4.74% APY, it exceeds the LST yield. As a result, users are not generating a positive return on looping the LST and wMATIC. Reducing the Slope1 to 5.00%, keeping utilisation constant, the borrow rate APY is reduced to 3.87%. At this level, the yield maximising strategy become profitable. Reducing the Slope1 parameter is the most effective way to stimulate wMATIC borrowing demand.
Lowering the Slope1 parameter will increase the utilisation of the wMATIC reserve. The new equilibrium scenarios are shown below:
- Borrow rate 4.30% supports utilisation of 63.10%
- Borrow rate 4.68% supports utilisation of 68.55%
- Borrow rate 4.74% supports utilisation of 69.50%
For each equilibrium scenario above, the Aave DAO's revenue increases.
Reducing the Slope1 to 5.00%, keeping utilisation constant, the deposit rate falls to 1.74% on v3. This compares favourably to the 0.53% deposit rate on v2. As a result, we do not expect to see any migration from v3 to v2 and propose no changes to the v2 wMATIC interest rate strategy.
Specification
Update the interest rate strategy as per below:
wMATIC Address: 0x0d500B1d8E8eF31E21C99d1Db9A6444d3ADf1270
variableRateSlope1: From 6.10% to 5.00%
All other parameters remain the same as the existing interest rate strategy.
Next Steps
- If consensus on ARFC stage is reached, escalate to ARFC snapshot stage.
- If ARFC snapshot stage outcome is YAE, TokenLogic will escalate to AIP stage.
Disclaimer
TokenLogic receives no compensation beyond Aave protocol for the creation of this proposal. TokenLogic is a delegate within the Aave ecosystem.
Copyright
Copyright and related rights waived via CC0.
Off-Chain Vote
YAE - 5.00%
415.57K AAVE99.5%
YAE - 4.30%
17.87 AAVE0%
NAEY
0.95 AAVE0%
ABSTAIN
1.92K AAVE0.5%
Quorum:130%
Discussion
Timeline
Nov 06, 2023Proposal created
Nov 07, 2023Proposal vote started
Nov 10, 2023Proposal vote ended
Dec 23, 2025Proposal updated