[NIP -42] Update Prime Cash interest rate models (Arbitrum)
Summary
In anticipation of the launch of ARB incentives on Notional V3 Arbitrum, we propose a set of parameter updates to increase the capital efficiency and utilization of the protocol’s variable rate markets. More specifically, we propose to increase the target interest rates in anticipation of higher borrowing demand. Additionally we propose updating the variable interest rate curves such that the variable rates increase more gradually before hitting the Kink2 utilization rate.
Prime Cash Interest Rate Models
We propose keeping kink2 utilization rates identical but increasing the kink1 utilization rates to 5% below the kink2 utilization rates. We also propose setting the current kinkRate2 rates as the new kinkRate1 rates. This will effectively shift the current target interest rates to utilization rates that are 5% lower than they currently are.
The proposed Prime Cash interest rate models can be visualized here. We present the breakdown of the proposed parameter changes for Prime Cash markets in the tables below:
Current parameters
| Parameters | ETH | Stablecoins | Liquid Staking Derivatives | WBTC |
|---|---|---|---|---|
| kinkUtilization1 | 15 (15%) | 10 (10%) | 50 (50%) | 15 (15%) |
| kinkUtilization2 | 80 (80%) | 85 (85%) | 75 (75%) | 70 (70%) |
| kinkRate1 (1/256) | 2 (1.52%) | 6 (2.36%) | 1 (0.59%) | 1 (0.59%) |
| kinkRate2 (1/256) | 5 (3.81%) | 12 (4.71%) | 2 (1.17%) | 3 (1.76%) |
| maxRate25BPS | 255 (195%) | 192 (100.5%) | 225 (195%) | 225 (150%) |
| minFeeRate5BPS | 10 (0.5%) | 10 (0.5%) | 10 (0.5%) | 10 (0.50%) |
| maxFeeRate25BPS | 160 (40%) | 160 (40%) | 160 (40%) | 160 (40%) |
| feeRatePercent | 20 (20%) | 20 (20%) | 20 (20%) | 20 (20%) |
Proposed parameters
| Parameters | ETH | Stablecoins | Liquid Staking Derivatives | WBTC |
|---|---|---|---|---|
| kinkUtilization1 | 75 (75%) | 80 (80%) | 70 (70%) | 65 (0.65%) |
| kinkUtilization2 | 80 (80%) | 85 (85%) | 75 (75%) | 70 (70%) |
| kinkRate1 (1/256) | 5 (3.81%) | 10 (3.93%) | 2 (1.17%) | 3 (1.76%) |
| kinkRate2 (1/256) | 12 (9.14%) | 25 (9.81%) | 5 (2.93%) | 6 (3.52%) |
| maxRate25BPS | 255 (195%) | 192 (100.50%) | 225 (150%) | 225 (150%) |
| minFeeRate5BPS | 10 (0.50%) | 10 (0.50%) | 10 (0.50%) | 10 (0.50%) |
| maxFeeRate25BPS | 160 (40%) | 160 (40%) | 160 (40%) | 160 (40%) |
| feeRatePercent | 20 (20%) | 20 (20%) | 20 (20%) | 20 (20%) |
Resources
Off-Chain Vote
Timeline
Jan 16, 2024Proposal created
Jan 16, 2024Proposal vote started
Jan 21, 2024Proposal vote ended
Jan 21, 2024Proposal updated