KVORUM
aaveSource: Aave governance v3 · #242

Update USDS & GHO Borrow Rate

executedFeb 9, 2025, 10:41 PM UTCby570x57ab…2922

01Summary

AISummary by Kvorumclaude-haiku-4-5

This proposal reduces USDS and GHO borrow rates across Aave's Prime and Core instances to align with the Sky Savings Rate reduction from 12.50% to 9.50%. USDS Slope1 decreases by 2-3%, and GHO Base decreases by 1.50% on Prime, making GHO borrowing slightly cheaper than USDS borrowing to incentivize GHO debt holdings.

Type
parameter change

Key changes

  • USDS Borrow Rate on Core: Base remains 0.75%, Slope1 reduced from 11.75% to 8.75% (-3.00%), resulting in borrow rate at Uoptimal of 9.50%(high)
  • USDS Borrow Rate on Prime: Base remains 0.75%, Slope1 reduced from 10.75% to 8.75% (-2.00%), resulting in borrow rate at Uoptimal of 9.50%(high)
  • GHO Borrow Rate on Prime: Base reduced from 8.00% to 6.50% (-1.50%), Slope1 and Slope2 unchanged, resulting in borrow rate at Uoptimal of 9.00%(high)
  • GHO borrow rate set 0.50% lower than USDS at Uoptimal to provide economic incentive for GHO debt over USDS(medium)

Notable concerns

  • Recent data shows wallets holding USDS deposits on Core borrowed 1,108,212 GHO units over last 30 days, indicating existing USDS-GHO carry trade activity
  • GHO Steward role not yet extended to Prime instance, limiting ability to adjust rates with short notice on that instance
  • Proposal depends on SSR reduction to 9.50% occurring on February 10th as expected
ContractsAaveV3EthereumAaveV3EthereumLido
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
Read the description ↗

02Description

512 words

Simple Summary

The Sky Savings Rate (SSR) is expected to be lowered from 12.50% to 9.50% on February 10th. This publication proposes updating the USDS Borrow Rate and also, reducing the GHO Borrow Rate on the Prime instance. This update will be conducted via a Direct-to-AIP process.

Motivation

In response to the latest proposal to reduce the SSR to 9.50%, this publication proposes reducing the Base on Core and Slope1 on Prime by 3.00% respectively.

The chart below shows the USDC and USDT deposit rates on Aave relative to the SSR over the last 90 days. More recently, the SSR has materially outperformed USDC and USDT deposit yield on Aave due to the borrow rate for USDC and USDT continually declining since mid-december.

The GHO Borrow Rate on Core is currently configured at 9.00%, representing a cost of capital of 9.42% for non stkAAVE holders. 9.42% compares favourably to the SUSDS Deposit Yield (Native + Incentives) of 13.42% + SPK airdrop rewards.

When the SSR is reduced to 9.50%, the USDS collateral and GHO debt free carry trade remains profitable with compressed margins until such time as the GHO Borrow Rate is lowered. Notably, over the last 30 days, wallets holding USDS deposits on Core have borrowed +1,108,212 units of GHO representing a small portion of newly borrowed GHO.

With the GHO Steward role in place on Core, the GHO Borrow Rate can be reduced with short notice and therefore, this publication focuses on adjusting the Prime instance of Aave where the GHO Steward role is not yet extended.

With the USDS Borrow Rate, Slope1 parameter, being reduced by 3.00% this publication proposes reducing the GHO Borrow Rate, Base parameter by 1.50%. Upon implementing both Borrow Rate updates, the GHO Borrow Rate at the Uoptimal will be 0.50% less than USDS. A slightly lower GHO Borrow Rate provides an economic incentive to hold GHO debt relative to USDS.

Specification

Prime Instance

USDS

DetailCurrentProposedChange
Base0.75%0.75%0.00%
Slope110.75%8.75%-2.00%
Slope235.00%35.00%0.00%

Borrow Rate at Uoptimal 9.50% matching the proposed SSR.

GHO

DetailCurrentProposedChange
Base8.00%6.50%-1.50%
Slope12.50%2.50%0.00%
Slope250.00%50.00%0.00%

Borrow Rate at Uoptimal 9.00% matching.

Core Instance

USDS

DetailCurrentProposedChange
Base11.75%8.75%-3.00%
Slope10.75%0.75%0.00%
Slope235.00%35.00%0.00%

Borrow Rate at Uoptimal 9.50% matching the proposed SSR.

References

Copyright

Copyright and related rights waived via CC0.

03Mismatch analysis

AIMismatch analysis by Kvorum

A calldata-vs-description analysis is not generated yet. Review the decoded actions →

04Actions

2 total
#0fallback()chain 0x1
Target
0x0c06…897f
Value
0 wei
Function
fallback()
Arguments
{}
Calldata
#1fallback()chain 0x1
Target
0x8ca0…a31b
Value
0 wei
Function
fallback()
Arguments
{}
Calldata

05Tally

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06Voters

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07Forum

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