Changing the interest rate parameters for VAI

Rationale

This VIP proposes a new set of parameters for VAI based on this discussion 1.

Summary

Increase the steepness of the interest rate curve of VAI to incentivize VAI close to $1.

Motivation

• Harden the peg by making it expensive to borrow VAI when the VAI price is low.
• Provide a better rate for borrowers when VAI is at $1.

Specification

Modification of this VIP:

• baseRate: 3% (from 4%)
• floatRate: 4000% (from 225%)

We provide an exemple of the implication of the changes in the forum post.

This VIP doesn’t enable VAI borrowings, this will be enabled in a following VIP contingent to having a significant healthy buffer in the VAI USDT PSM.

Risk Analysis

• Reduction of earnings if VAI stays at $1
• Increasing the VAI borrow rate might reduce VAI borrowings and TVL

Read the Steakhouse disclaimers: https://www.steakhouse.financial/disclaimers