RariCapital

Summary: There are natural incentives for users to borrow “stable assets” (DAI, USDC, ETH and WBTC) but incentives to deposit these stable assets into a Fuse pool are low.

This is because the interest curves for these safe assets only go up to APYs that are standard (or less) compared to other interest rate protocols. This means that borrow rates are dangerously low while deposit rates are uncompetitive.

No one is going to supply DAI for 5% APY when the risks are higher than just depositing DAI on AAVE which currently is offering 10% APY.

Borrowers are also getting an unfairly low rate for the amount of risk they put depositors in and they would likely be comfortable with paying higher borrow APYs on stable assets if it meant there would be more liquidity to borrow against!

Since most of the assets in these DAO pools are not available anywhere else, we still offer a unique value proposition unmatched by other protocols and there is no competition for these borrowers to turn to for lower rates.

Background: There is low liquidity of “stable” assets that are necessary for a healthy pool. Users are not willing to deposit their stable assets for measly APYs when they could get much better risk-adjusted returns elsewhere right now.

Abstract: Change DAI, USDC, ETH, and WBTC’s Interest Rate Models to the Cream’s "Stable + Major’’ configuration with an additional 25% steepness increase in all DAO pools.

Motivation: Fuse DAO pools will not be useful to lenders if there are no stable assets to borrow against.

Fuse DAO pools are not appealing to lenders of stable assets as the risk adjusted returns are not high enough right now.

For: Change the interest curves of: DAI, USDC, ETH and WBTC to Cream’s "Stable + Major’’ configuration + 25% steepness in all DAO pools.

Against: Do nothing.