CRV Interest Rate Curve Upgrade
01Summary
Llama proposes updating CRV interest rate parameters across Aave Ethereum v2, Polygon v3, and Polygon v2 deployments. Key changes include: increasing Polygon v3 SupplyCap from 937,700 to 1,125,240 units, raising Uoptimal from 45% to 70%, introducing a 3% base rate, increasing Slope1 to 14%, and aligning Reserve Factor to 20%. Polygon v2 and Ethereum v2 (frozen reserves) will receive matching base rate and slope adjustments. The changes aim to improve capital efficiency and increase protocol revenue from sustained CRV borrowing demand.
- Type
- parameter change
Key changes
- Increase Polygon v3 SupplyCap from 937,700 to 1,125,240 units (19.9% increase)(high)
- Increase Polygon v3 BorrowCap from 640,440 to 900,190 units through Uoptimal adjustment(high)
- Increase Uoptimal on Polygon v3 from 45% to 70% to improve capital efficiency(high)
- Introduce 3% base variable interest rate across all three deployments(high)
- Increase Variable Slope1 from 7% to 14% across all three deployments(high)
- Increase Polygon v3 Reserve Factor from 10% to 20%, aligning with other deployments(medium)
- Increase Stable Slope1 on Polygon v2 and Ethereum v2 from 10% to 17%(medium)
- Adjust Base Stable Rate Offset on Polygon v3 from 2% to 3%(low)
Notable concerns
- Proposal acknowledges Slope1 parameter will require future monitoring and optimization based on risk exposure and revenue generation
- CRV SupplyCap on Polygon v3 is currently at 100% utilization, creating urgency for this update
Generated by Kvorum
02Description
Simple Summary
Llama presents a proposal to update the CRV interest rate parameters on the Aave Ethereum v2, Polygon v3, and Polygon v2 Liquidity Pools.
Abstract
The CRV SupplyCap on the Polygon v3 deployment is currently at 100% with borrowing costs of 5.02% with a Utilization of 31.51% relative to a 45% Uoptimal value, [1]. This proposal intends to increase the CRV SupplyCap on Polygon v3 deployment, improve the capital efficiency of each liquidity pool, and increase the amount of revenue generated across the various CRV reserves.
Capital efficiency is improved on active reserves by increasing the Uoptimal value. Revenue is increased by introducing a Base interest rate, increasing the Slope1 and aligning the Reserve Factor to 20% across all pools.
This AIP is expected to lead more CRV revenue and significantly reduce the amount of free CRV in active reserves.
Motivation
With the CRV reserve on Polygon reaching its SupplyCap, this is an ideal time to implement an upgrade that addresses the SupplyCap and Interest Rate parameters.
The current CRV Interest Rate reflects the original parameters implemented when the liquidity pools were deployed. The Interest Rate Parameters do not take into consideration the alternative use cases for CRV and consequently, Aave has missed out on revenue from the sustained borrowing demand.
Llama expects the sustained borrowing demand to continue due to Curve's veTokenomics presenting several opportunities for CRV borrowers to earn yield.
In this proposal, the Uoptimal parameter is to be increased from 45% to 70%, which improves the capital efficiency of active reserves.
Specific to the Polygon v3 deployment, increasing the Uoptimal parameter from 45% to 70% will lead to an increase in the BorrowCap, which is a function of the SupplyCap and Uoptimal parameter.
BorrowCap = SupplyCap * (Uoptimal + 0.1)
The new SupplyCap parameter has been prepared by Chaos Labs, 1,125.24K. This generates a new Borrow Cap of 900.19K, [2].
The interest rate at the current Optimal point is 7%.
This proposal recommends introducing a Base and increasing the Slope1 parameter to 3% and 14% respectively. This will lead to a substantial change to the current curve. Over time, we will monitor the reserve and amend the Slope1 parameter to optimize for risk exposure and revenue generation.
The graphic below shows the changes in the interest rate.
The Reserve Factor on Polygon v3 is to be increased from 10% to 20%, bringing it in line with all other Aave deployments.
Specification
The below table shows the current and proposed changes to the CRV Reserve on Polygon v3, Polygon v2 and Ethereum v2.
Polygon v3 - Active
| Parameter | Current | Proposed |
|---|---|---|
| SupplyCap | 937,700 units | 1,125,240 units |
| BorrowCap | 640,440 units | 900,190 units |
| Uoptimal | 45.00% | 70.00% |
| Variable Base | 0.00% | 3.00% |
| Variable Slope1 | 7.00% | 14.00% |
| Variable Slope2 | 300.00% | 300.00% |
| Reserve Factor | 10.00% | 20.00% |
| Stable Borrowing | Disabled | Disabled |
| Stable Slope1 | 0.00% | 8.00% |
| Stable Slope2 | 0.00% | 300.00% |
| Base Stable Rate Offset | 2.00% | 3.00% |
| Stable Rate Excess Offset | 5.00% | 5.00% |
| Optimal Stable To Total Debt Ratio | 20.00% | 20.00% |
Polygon v2 - Frozen
| Parameter | Current | Proposed |
|---|---|---|
| Uoptimal | 45.00% | 45.00% |
| Base | 0.00% | 3.00% |
| VariableSlope1 | 7.00% | 14.00% |
| VariableSlope2 | 300.00% | 300.00% |
| StableSlope1 | 10.00% | 17.00% |
| StableSlope2 | 300.00% | 300.00% |
| Reserve Factor | 20.00% | 20.00% |
Ethereum v2 - Frozen
| Parameter | Current | Proposed |
|---|---|---|
| Uoptimal | 45.00% | 45.00% |
| Base | 0.00% | 3.00% |
| VariableSlope1 | 7.00% | 14.00% |
| VariableSlope2 | 300.00% | 300.00% |
| StableSlope1 | 10.00% | 17.00% |
| StableSlope2 | 300.00% | 300.00% |
| Reserve Factor | 20.00% | 20.00% |
Implementation
Polygon v3
Test cases can be found here
Payload Implementation can be found here
New Interest Rate Strategy deployment script can be found here
Proposal Payload deployed address can be found here
Interest Rate Strategy deployed address can be found here
Polygon v2
Test cases can be found here
Payload Implementation can be found here
New Interest Rate Strategy deployment script can be found here
Proposal Payload deployed address can be found here
Interest Rate Strategy deployed address can be found here
Ethereum v2
Test cases can be found here
Payload Implementation can be found here
New Interest Rate Strategy deployment script can be found here
Proposal Payload deployed address can be found here
Interest Rate Strategy deployed address can be found here
Security Considerations
The proposal Payload was reviewed by Bored Ghost Developing.
Governance Considerations
Aave governance forum discussion, Snapshot vote and Risk Service Provider feedback.
References
- https://app.aave.com/reserve-overview/?underlyingAsset=0x172370d5cd63279efa6d502dab29171933a610af&marketName=proto_polygon_v3
- https://governance.aave.com/t/aave-v3-borrow-caps-methodology/10925
- https://creativecommons.org/publicdomain/zero/1.0/
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
The proposal is a standard Aave governance action that executes pre-deployed, audited payload contracts rather than setting parameters directly in the top-level calldata. I compared the two decoded actions' target addresses against the specific contract addresses the description cites in its 'Implementation' section: action 0's target (0xbacbe678e2c59343024fd5755262c7b0f77867d1) exactly matches the Ethereum v2 Proposal Payload address, and action 1's argument (0x3b6532Efb7a60711F8F3FA77A589a726c836f4CF) exactly matches the Polygon Proposal Payload address (used for both the v3 and v2 sections, consistent with the description listing the same address twice). The intermediate call to 0x158a6bc0... is the standard cross-chain governance bridge executor used by Aave to relay execution to Polygon, which is routine infrastructure not requiring explicit mention in the prose. Since the granular parameter changes (Uoptimal, Base, Slope1, Reserve Factor, SupplyCap/BorrowCap, etc.) are encoded inside these already-deployed and linked payload contracts rather than the top-level calldata, they cannot be independently verified from the decoded actions alone, but the addresses align perfectly with what the description claims will be executed. No mismatches in target addresses, no omitted major actions, and no extra actions beyond what's described. Given the strong address correspondence and typical proposal structure, I assess this as consistent with high confidence.
Generated by Kvorum
04Actions
- Target
- 0xbacb…67d1
- Value
- 0 wei
- Function
- fallback()
- Arguments
{}- Calldata
- Target
- 0x158a…d45b
- Value
- 0 wei
- Function
- execute(address)
- Arguments
{ "0": "0x3b6532Efb7a60711F8F3FA77A589a726c836f4CF" }- Calldata
05Tally
Summed from votes
06Voters
No votes recorded yet.
07Forum
No forum thread is confidently linked to this proposal.
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