- Democracy/
- Proposals/
- #100/
Adjust USDT and USDC lending market params
The $USDT lending market on Interlay was recently maxed out. $492k USDT had been deposited and $490k have been borrowed, leaving only $2k to be withdrawn by depositors until more borrowers repaid their loans. This made the Interlay USDT market illiquid and in need of tuning.
First, the $USDT market has a cap of $600k whereas the recently opened USDC market has a limit of $2M and we just demonstrated demand for $492k. Therefore this proposal similarly lifts the cap to $2M USDT. There is plenty of USDT liquidity in the Omnipool for liquidations.
Next, USDT has a liquidation threshold of 74% currently. However, the USDC market was recently opened with a higher 87% liquidation threshold. Since token volaltility is low, the “collateralization analysis” tool indicated a much higher 95% threshold. Therefore simply increase USDT liquidation threshold to 87% to match USDC.
Finally and most importantly this proposal adjusts the lending jump curve for both the USDT and USDC markets.
- The “utilization target” is decreased from 90% to 80% so that the equilibrium point for the markets is farther from 100% to maintain liquidity for withdrawals.
- The “full rate” (borrowing rate when 100% tokens are loaned) is increased from 50% to 150% to give the market more dynamic range. Moonwell USDT market at 93% utilization on 970k USDT had 192% APR, demonstrating that the market will occasionally pay a much higher rate.
- Finally, the borrowing rate on Moonwell and Prime remained in the 30-60% range for most of the past two weeks but Moonwell has fallen to 10% APR at 79% utilization while their supply rate is still 22% APR due to incentives. Therefore we increase the Interlay USDT “jump rate” (borrow rate at 80% target utilization) from 10% to 20% to attract loan deposits while staying below the equilibrium borrow rates on Moonwell and Prime.
The combination of reducing the target utilization while increasing the jump rate should keep the curve relatively flat to minimize borrowing rate APR jumps for users despite the full rate being significantly increased.
The Interlay team wrote scripts and a guide to creating governance proposals to enable the Interlay community to execute on the many suggestions that the community makes, supporting further decentralization of protocol governance. Proposal creators are reimbursed from the Interlay treasury based on the effort required for each proposal.
Proposal guide: https://interlay.notion.site/Registering-new-token-using-script-139015d02fb34fd38d078fdf3e8d1f94
Therefore this governance proposal will reimburse me 13 hrs x $100/hr = $1300 in Interlay tokens.
Many thanks to Jose.Crypto for pushing forward this process and supporting the Interlay community over the last several months. In fact, CAP nominated him for a $1000 tip which is the last call in this proposal.
These amounts are only paid if the entire proposal successfully executes.
Finally, thanks to CAP and InternalError for their feedback on rate optimization. And thanks to the Interlay team for continuing to support technical questions from proposal creators while the Interlay team is focused on launching the “Build on Bitcoin” (BOB) Bitcoin L2.
USDT borrowers - beware that if the USDT market lending is still maxxed out on March 25th when this referenda executes, the borrowing rate will spike temporarily from 45% to 140% until some loans are repaid.
USDT lenders - the typical lending APR should increase to 20+% even when the market isn't maxed out, making your loaned collateral even more profitable. Let's push for more USDT liquidity and deposits on Polkadot!