[NIP-58] Update Variable and Fixed Rate Interest Rate Models (Mainnet & Arbitrum)
Summary
In preparation for Notional’s upcoming quarterly roll occurring Wednesday, March 17th at 8:00 PM EST, we propose a set of parameter updates to Notional V3. More specifically, we propose updating the interest rate models to accommodate higher interest rates as borrow demand across DeFi has increased in recent weeks as highlighted by MakerDAO’s increase of the DAI savings rate to 15%.
Prime Cash Interest Rate Models
We propose increasing the interest rates at target utilization rate (kinkUtilization2) for stablecoins markets from 11.8% to 14.1%. This will allow borrowers to borrow at higher variable rates without pushing utilization above kink2 utilization rates. This change will be applied on both Mainnet and Arbitrum.
fCash Interest Rate Models
We propose a set of parameters that will accommodate higher interest rates for Notional’s fixed rate markets. We propose setting the lower kink utilization rates (kinkUtilization1) at 50% and the higher kink utilization rates (kinkUtilization2) at 80%. Additionally, we propose setting the optimal interest rates (kinkRate2) higher.
We also propose setting leverage thresholds at 84% for all markets, setting deposit shares at 60% for the 3 month markets and 40% for the 6 month markets. We also propose setting the initial market proportions at 30%.
The proposed fCash interest rate models can be visualized here. We propose these changes being applied to Arbitrum. We propose to only update the Mainnet stablecoin fixed rate IRMs.
3 Month fCash markets
In the tables below we present the breakdown of the proposed parameter changes for 3M fCash markets:
Current parameters (3M fCash Markets)
| Parameters | ETH | Stablecoins | Liquid Staking Derivatives |
|---|---|---|---|
| kinkUtilization1 | 15 (15%) | 15 (15%) | 25 (25%) |
| kinkUtilization2 | 75 (75%) | 80 (80%) | 75 (75%) |
| kinkRate1 (1/256) | 27 (3.16%) | 30 (3.52%) | 6 (0.70%) |
| kinkRate2 (1/256) | 43 (5.04%) | 51 (5.98%) | 17 (1.99%) |
| maxRate25BPS | 120 (30%) | 120 (30.00%) | 120 (30.00%) |
| minFeeRate5BPS | 3 (0.15%) | 3 (0.15%) | 2 (0.10%) |
| maxFeeRate25BPS | 8 (2.00%) | 8 (2.00%) | 8 (2.00%) |
| feeRatePercent | 8 (8%) | 8 (8.00%) | 8 (8.00%) |
| Initial proportion | 50.00% | 50.00% | 50.00% |
| Deposit share | 55.00% | 55.00% | 50.00% |
| Leverage threshold | 75.00% | 80.00% | 75.00% |
Proposed parameters (3M fCash Markets)
| Parameters | ETH | Stablecoins | Liquid Staking Derivatives |
|---|---|---|---|
| kinkUtilization1 | 50 (50%) | 50 (50%) | 50 (50%) |
| kinkUtilization2 | 80 (80%) | 80 (80%) | 80 (80%) |
| kinkRate1 (1/256) | 34 (3.98%) | 45 (5.27%) | 9 (1.05%) |
| kinkRate2 (1/256) | 70 (8.20%) | 95 (11.13%) | 34 (3.98%) |
| maxRate25BPS | 120 (30%) | 120 (30.00%) | 120 (30.00%) |
| minFeeRate5BPS | 3 (0.15%) | 3 (0.15%) | 2 (0.10%) |
| maxFeeRate25BPS | 8 (2.00%) | 8 (2.00%) | 8 (2.00%) |
| feeRatePercent | 8 (8%) | 8 (8.00%) | 8 (8.00%) |
| Initial proportion | 30.00% | 30.00% | 30.00% |
| Deposit share | 60.00% | 60.00% | 60.00% |
| Leverage threshold | 84.00% | 84.00% | 84.00% |
6 Month fCash markets
In the tables below we present the breakdown of the proposed parameter changes for 6M fCash markets:
Current parameters (6M fCash Markets)
| Parameters | ETH | Stablecoins | Liquid Staking Derivatives |
|---|---|---|---|
| kinkUtilization1 | 15 (15%) | 40 (40%) | 25 (25%) |
| kinkUtilization2 | 75 (75%) | 80 (80%) | 75 (75%) |
| kinkRate1 (1/256) | 10 (0.98%) | 25 (2.44%) | 4 (0.39%) |
| kinkRate2 (1/256) | 41 (4.00%) | 51 (4.98%) | 12 (1.17%) |
| maxRate25BPS | 100 (25.00%) | 100 (25.00%) | 100 (25.00%) |
| minFeeRate5BPS | 3 (0.15%) | 3 (0.15%) | 2 (0.10%) |
| maxFeeRate25BPS | 8 (2.00%) | 8 (2.00%) | 8 (2.00%) |
| feeRatePercent | 8 (8.00%) | 8 (8.00%) | 8 (8.00%) |
| Initial proportion | 40.00% | 40.00% | 40.00% |
| Deposit share | 45.00% | 45.00% | 50.00% |
| Leverage threshold | 60.00% | 60.00% | 60.00% |
Proposed parameters (6M fCash Markets)
| Parameters | ETH | Stablecoins | Liquid Staking Derivatives |
|---|---|---|---|
| kinkUtilization1 | 50 (50%) | 50 (50%) | 50 (50%) |
| kinkUtilization2 | 80 (80%) | 80 (80%) | 80 (80%) |
| kinkRate1 (1/256) | 34 (3.98%) | 54 (5.27%) | 10 (0.98%) |
| kinkRate2 (1/256) | 75 (8.79%) | 110 (10.74%) | 41 (4.00%) |
| maxRate25BPS | 120 (30%) | 120 (30.00%) | 120 (30.00%) |
| minFeeRate5BPS | 3 (0.15%) | 3 (0.15%) | 2 (0.10%) |
| maxFeeRate25BPS | 8 (2.00%) | 8 (2.00%) | 8 (2.00%) |
| feeRatePercent | 8 (8%) | 8 (8.00%) | 8 (8.00%) |
| Initial proportion | 30.00% | 30.00% | 30.00% |
| Deposit share | 40.00% | 40.00% | 40.00% |
| Leverage threshold | 84.00% | 84.00% | 84.00% |
Resources
Off-Chain Vote
Timeline
Mar 11, 2024Proposal created
Mar 11, 2024Proposal vote started
Mar 16, 2024Proposal vote ended
Mar 16, 2024Proposal updated