BIP#62: Lower Base Rate to 7% for ETH and USDT

This proposal aims to gradually reduce the baseRate for lending ETH and USDT on BendDAO to 7% by decreasing the rates by 1% each week until the target is met. This adjustment is intended to enhance the attractiveness of borrowing on the platform, boost borrower/lender interest, and ensure fair returns for liquidity providers.

Motivation

The current baseRate for lending ETH is 17.00%, and for USDT, it is 12.00%. This high baseRate can deter borrowers from utilizing the platform, impacting overall utilization rates and liquidity provider benefits. By aligning the baseRate for ETH and USDT to a more competitive level of 7%, we aim to create a more balanced and attractive ecosystem within BendDAO. Additionally, the current ETH in the pool is very low, around 4,000 ETH, and this proposal should help create a new inflow of ETH into the pool.

Proposal

Introduction:

As a liquidity provider and participant in BendDAO’s lending platform, I have observed the current interest rate settings, particularly the baseRate for lending ETH and USDT. While recognising the necessity for sustainable operations and risk management, I propose an adjustment to the baseRate to enhance the attractiveness of borrowing on the platform while still ensuring fair returns for liquidity providers.

Current Situation:

At present, the baseRate for lending ETH stands at 17.00%, with additional parameters such as slope1 at 16.00% and slope2 at 200.00%. The optimalUtilizationRate is set from 65%. The baseRate for USDT lending is currently at 12.00%.

Rationale for Proposal:

Comparing the baseRate of ETH lending to that of USDT, it becomes evident that the current rates are comparatively high. This discrepancy may potentially deter borrowers from utilizing the platform for ETH and USDT loans, impacting the overall utilization rate and, consequently, the benefits to liquidity providers.

Proposal Details:

I propose reducing the baseRate for lending ETH and USDT to align more closely with a target baseRate of 7%. This reduction will be implemented gradually, decreasing the baseRate by 1% each week until the target is met. This means it will take 10 weeks for ETH (from 17% to 7%) and 5 weeks for USDT (from 12% to 7%).

Action Items:

Implement a weekly reduction of 1% in the baseRate for ETH lending until it reaches 7%. Implement a weekly reduction of 1% in the baseRate for USDT lending until it reaches 7%. Monitor the impact on borrower/lender APR, utilization rates, and liquidity provider benefits. Expected Impact:

Increased Borrower Interest: By gradually lowering the baseRate, we anticipate a rise in borrower interest, thereby boosting the utilization rate of the platform. Enhanced Liquidity Provider Benefits: With higher utilization rates, liquidity providers can expect to see increased returns on their provided liquidity. Platform Growth and Sustainability: A more balanced interest rate structure can contribute to the long-term growth and sustainability of BendDAO’s lending platform. New Inflow of ETH: Given that the ETH in the pool is currently very low (around 4,000 ETH), this proposal should help create a new inflow of ETH into the pool. Conclusion

In conclusion, this proposal seeks to optimize the interest rate structure of BendDAO’s lending platform and enhance the benefits for all participants. By gradually reducing the baseRate for lending ETH and USDT to 7%, we aim to foster a more attractive borrowing environment while ensuring equitable returns for liquidity providers.

Voting Quorum: Approximately 46M veBEND (10% of the total supply)

Pass Rate: Over 70% approval The voting will last for 5 days.