Update DAI Interest Rate Model to Better Accommodate Zero Stability Fee
01Summary
Update the DAI interest rate model in Compound to provide better returns for capital suppliers when the MakerDAO Stability Fee and Dai Savings Rate are zero, with minimal impact on borrowers. The new model provides modest interest rates below 90% utilization and reduces rate volatility above 90% utilization.
- Type
- parameter change
Key changes
- Replace current DAI interest rate model with new DAIInterestRateV2 model that provides non-zero interest rates to capital suppliers when utilization is below 90% (previously near-zero returns)(high)
- Reduce interest rate volatility when capital utilization exceeds 90% by adjusting the slope of the post-kink curve(medium)
- Accommodate prolonged zero Stability Fee and Dai Savings Rate periods in MakerDAO's MCD system(high)
Notable concerns
- Current model produces volatile rates above 90% utilization that may impact user experience
- Model was designed without anticipating extended zero SF/DSR periods in MakerDAO
Generated by Kvorum
02Description
Update DAI Interest Rate Model to Better Accommodate Zero Stability Fee
Proposal Summary
In this Compound Improvement Proposal, we propose a new interest rate model for Dai. We believe this new interest rate model provides a better user experience to capital suppliers, with minimal impact to borrowers.
Context
When the DAI interest rate model was developed and deployed, the community, including the Compound team, did not anticipate the Stability Fee (SF) and Dai Savings Rate (DSR) in MakerDAO's Multi-Collateral Dai (MCD) system to be set to zero for a prolonged period of time. As a result, the current Dai interest rate model in Compound does not provide a good user experience to capital suppliers when the SF and/or DSR are zero.
Chart of Current Interest Rate Model
This is a chart of the current Dai interest rate model when the Dai Savings Rate is set to zero:
As you can see, when capital utilization is below 90%, suppliers earn practically nothing. And when capital utilization is greater than 90%, rates fluctuate wildly due to the steep slope of the post-kink part of the curve.
Proposed Interest Rate Model
Our proposal adjusts the current model to provide a modest interest rate to capital suppliers when interest rates are below 90%. As an added benefit, when rates are greater than 90%, the interest rate volatility should decrease (slightly).
Supporting Links
03Mismatch analysis
A calldata-vs-description analysis is not generated yet. Review the decoded actions →
04Actions
- Target
- 0x5d3a…3643
- Value
- 0 wei
- Function
- _setInterestRateModel(address)
- Arguments
{ "0": "0x000000007675b5E1dA008f037A0800B309e0C493" }- Calldata
05Tally
Summed from votes
06Voters
| Voter | Choice | % of total | Rationale | ||
|---|---|---|---|---|---|
| ED0xed40…08ff | For | 325.7K | 35.28% | — | 7y ago |
| 810x8169…9806 | For | 101K | 10.94% | — | 7y ago |
| 7E0x7e4a…19fa | For | 100K | 10.83% | — | 7y ago |
| 340x3429…f481 | For | 100K | 10.83% | — | 7y ago |
| 1D0x1d29…5d1f | For | 50K | 5.42% | — | 7y ago |
| D00xd061…1fb1 | Against | 25K | 2.71% | — | 7y ago |
| BE0xbe1f…5733 | For | 25K | 2.71% | — | 7y ago |
| AF0xaf7e…afad | For | 25K | 2.71% | — | 7y ago |
| B00xb032…449b | For | 24.1K | 2.61% | — | 7y ago |
| D60xd681…7d6e | For | 24.1K | 2.61% | — | 7y ago |
| 540x54a3…e189 | For | 22.5K | 2.44% | — | 7y ago |
| E50xe5b5…4b03 | For | 15K | 1.62% | — | 7y ago |
| 980x98ea…4cd7 | For | 15K | 1.62% | — | 7y ago |
| MYmykel.eth0xa0dc…c432 | For | 13K | 1.41% | — | 7y ago |
| 870x8703…87be | For | 12.5K | 1.35% | — | 7y ago |
| CF0xcfae…135a | For | 10K | 1.08% | — | 7y ago |
| BAbanked.eth0xfdaa…3733 | For | 10K | 1.08% | — | 7y ago |
| 580x582c…d468 | For | 9.8K | 1.06% | — | 7y ago |
| 870x879d…0f11 | For | 7.5K | 0.82% | — | 7y ago |
| 8F0x8fe1…572d | For | 4.7K | 0.51% | — | 7y ago |
| A50xa5dc…d648 | For | 3.3K | 0.35% | — | 7y ago |
| 180x181f…4b56 | Against | 1 | 0.00% | — | 7y ago |
07Forum
No forum thread is confidently linked to this proposal.