SIP-61: Increase USDs APR cap

Author: Sperax Core Team Created: April, 2, 2024 Labels: Product-Features, USDs-Parameters

Summary

With SIP-52, SperaxDAO introduced USDs 2.0 and put a maximum cap on auto-yield APR at 10%. This proposal aims to increase the maximum cap of USDs auto yield.

Motivation

The stablecoin market has been pretty strong in the Arbitrum ecosystem. Returns on stablecoin supply to various protocols have been on the higher side USDs TVL has been decreasing

Overview

With the excitement and volume coming back into the crypto market, the yield on stablecoins especially on the lending platforms has been surging. This is a consequence of a high borrowing demand, with traders willing to pay high borrow-APRs.

Since demand for stablecoin is back, the delta-neutral yield earning strategies are giving good returns on stables. This means good returns on USDs collaterals. However, the available yield opportunities across the protocol are far better than the 10% capped APR of USDs. This results in decrement in USDs TVL considerably even though the (APR + fees) on USDs stable farms in Demeter is over 40%. USDs is not being able to attract stable suppliers.

The high demand for stables in the market still seems to be growing as all the lending protocols are almost maxed out. We believe that the demand will remain the same for a few quarters at least and USDs collaterals also help in supplying to that demand. To make USDs attractive it is required to match up to the returns available in the market on stables with some extra rewards.

To address this we propose to increase the capped USDs auto-yield APR to 25%. The extra yield over 25% will go to the yield reserves and will be used to fund the low yield periods.

Technical Specification

Increase APR cap for USDs auto-yield to 25% from 10%

Voting

For: Increase the USDs APR cap to 25% Against: Do not implement this proposal