[EXAIP-20] Interest Rate Model Parameters Update for USDC

• Proposal ID: EXAIP-20
• Proposer: Exactly Core Team
• Date: February 6, 2025

Summary

This proposal introduces an update to the Exactly Protocol's Interest Rate Model parameters for the USDC market. The successful integration of the USDC native market (EXAIP-11) and the gradual decline in liquidity within the bridged USDC.e market—scheduled to be frozen soon—have prompted this adjustment. The goal is to consolidate all stablecoin liquidity into the USDC native market, ensuring a more robust and efficient ecosystem.

Rationale

The transition away from the bridged USDC.e market has led to reduced liquidity, creating a potential risk of market manipulation in a low-liquidity environment. To address this, the proposal aims to adjust the Interest Rate Model parameters to:

1. Discourage market manipulations.
2. Maintain the functionality and health of the USDC native market.
3. Support the seamless withdrawal experience for all users.

This adjustment seeks to improve the USDC market's overall stability and attractiveness by reducing the interest rate volatility.

Technical Implementation

The proposed changes involve recalibrating the parameters of the Interest Rate Model for the USDC native market. These adjustments will:

• Reduce the sensitivity of interest rate fluctuations in response to changes in utilization.
• Protect users from potential liquidity risks.
• Ensure a fair and predictable lending and borrowing environment.

The Exactly Core Team will test and validate the updated parameters before deployment.

New curve parameters of the USDC native market:

Also, the new time decay factor (β_slow) used when the supply is above average for all the assets will be 0.000025

Conclusion

This proposal aims to strengthen the Exactly Protocol by consolidating liquidity into the USDC native market and optimizing the Interest Rate Model for better stability and user experience.