Simple Summary

Gauntlet proposes adjusting interest rate parameters and reserve factors for assets on Aave’s active V3 markets (Ethereum, Arbitrum, Avalanche, Optimism, Polygon). Tokens impacted include stable coins (USDT, MAI, FRAX, EURS, agEUR), Large Cap (WETH), and Small Cap (GHST, DPI).

More details can be found in the forum post.

Abstract

Given the significant shifts in crypto markets, Gauntlet’s platform has evaluated all assets on Aave V3 and has identified opportunities to adjust parameters for certain assets for the benefit of the protocol. Last November, we proposed interest rate curve changes for the Aave V2 Ethereum market using our interest rate curve optimization framework. Our methodology makes data-informed decisions around setting borrower and supplier interest rates when market conditions require the protocol to reduce risk or when strategic opportunities present themselves to increase protocol revenue without materially impacting risk. This analysis applies this same methodology to the active Aave V3 markets.

Methodology

Among other factors, there are two primary reasons to adjust an interest rate curve:

1. mitigate the risk of 100% utilization in a pool
2. build reserves via protocol revenue to cover insolvencies or other expenses in the future

Specifications

The table below summarizes the proposed interest rate and reserve factor parameters on the V3 markets, with changes denoted by an arrow. As an example - for MAI, the parameter changes are intended for Avax V3 and Polygon V3.

Parameter	USDT	FRAX	MAI	EURS	agEUR	WETH	GHST	DPI
Variable Base	0	0	0	0	0	0.0→0.01	0	0
Stable Base	0.05	0.05	0.05	0.05	0.05	0.09→0.068	0.09	0.09
Uoptimal	0.9→0.8	0.9→0.8	0.9→0.8	0.9→0.8	0.9→0.8	0.45→0.8	0.45	0.45
Variable Slope 1	0.04	0.04	0.04	0.04	0.04	0.07→0.038	0.07	0.07
Variable Slope 2	0.6→0.75	0.6→0.75	0.6→0.75	0.6→0.75	0.6→0.75	3.0→0.8	3	3
Stable Slope 1	0.005	0.005	0.005	0.005	0.005	0.0→0.04	0	0
Stable Slope 2	0.6→0.75	0.6→0.75	0.6→0.75	0.6→0.75	0.6→0.75	0.0→0.8	0	0
Reserve Factor	0.1	0.1	0.1→0.2	0.1	0.2	0.1→0.15	0.2→0.35	0.2→0.35
Affected Markets	Arbitrum, Avalanche, Optimism, Polygon	Avalanche	Avalanche, Polygon	Arbitrum, Polygon	Polygon	Arbitrum, Avalanche, Optimism, Polygon	Polygon	Polygon

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.