WETH & wstETH Comets Interest Rate Curve Recommendations on Mainnet
01Summary
Gauntlet recommends reducing interest rates on WETH and wstETH lending markets on Ethereum to 2% at kink and 5% at maximum utilization, down from current levels. These changes aim to keep borrow costs low and prevent liquidations during volatile market conditions following the Kelp exploit.
- Type
- parameter change
Key changes
- Reduce kink rate from current value to 2.00% APR for WETH and wstETH comets(high)
- Reduce maximum rate from current value to 5.00% APR for WETH and wstETH comets(high)
- Flatten interest rate curve slope below kink and compress slope above kink(medium)
- Maintain borrow kink at 90% utilization across all markets(medium)
- Maintain base rate at current values(low)
Notable concerns
- Changes motivated by heightened volatility and Kelp exploit aftermath
- LST/LRT-based looping strategies facing negative carry
- Proposal indicates ongoing monitoring will be needed to adjust rates as market conditions evolve
Generated by Kvorum
02Description
WETH & wstETH Comets Interest Rate Curve Recommendations on Mainnet
Simple Summary
Given heightened market activity and elevated volatility across ETH markets, Gauntlet recommends the following Interest Rate (IR) Curve updates across WETH comets on Ethereum. These changes are designed to keep borrow costs low and avoid liquidations during the volatile period.
Motivation
The recent Kelp exploit has led to heightened volatility and shifting dynamics across ETH-correlated assets. In this environment, LST/LRT-based looping strategies are facing a significantly high negative carry.
The recommendations below flatten the slope below kink and compress the slope above kink, resulting in lower kink and max borrow rates across all WETH markets. The intent is to:
- Keep Compound’s WETH borrow rates not too high so that unwinding can happen gradually in a volatile environment.
- Decrease existing borrow positions gradually without pushing rates to a level that would unwind a high amount of the existing ETH-leverage positions.
We will continue to monitor utilization and reserve growth and will adjust as conditions evolve.
Specification
Target APRs at kink and at 100% utilization across the comets:
| Comet | Kink Rate | Max Rate |
|---|---|---|
| Ethereum wstETH | 2.00% | 5.00% |
| Ethereum WETH | 2.00% | 5.00% |
Borrow kink is held at 90% across all markets. The base rate is held constant at current values. Slope Low and Slope High are updated to achieve the target kink and max rates above.
03Mismatch analysis
The proposal describes IR-curve updates for two WETH-related Compound comets (labelled 'wstETH' and 'WETH' collateral markets) targeting a 2.00% kink rate and 5.00% max rate, with kink held at 90% and base rate unchanged. The calldata updates two distinct comet proxies with identical slope parameters: borrowSlopeLow=1.111e16 (1.111%), borrowSlopeHigh=3e17 (30%), supplySlopeLow=2e16 (2%), supplySlopeHigh=2.7e17 (27%). Using the stated 90% kink, borrow rate at kink = slopeLow*0.9 ≈ 1.0% plus an unchanged base rate (implied ~1%) yielding ~2.00% kink rate, and max rate = kink rate + slopeHigh*0.1 ≈ 2%+3%=5.00%, matching the table exactly for both markets. One comet (0xA175...) omits explicit kink-setting calls, implying its kink is already 90% and therefore 'held constant' as claimed; the other comet (0x3D0b...) explicitly sets both borrow and supply kink to 900000000000000000 (90%), consistent with the same claim. No base-rate-setting calls appear anywhere, matching the 'base rate held constant' statement. Each comet's configuration change is finalized via deployAndUpgradeTo, a standard mechanical step not requiring separate mention in the description. All numeric values convert consistently to the percentages stated, addresses are used consistently per comet, and no extra or missing high-impact actions (transfers, role grants, migrations) are present. Based on this comparison, the description faithfully and completely represents the calldata's effects.'
Generated by Kvorum
04Actions
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setBorrowPerYearInterestRateSlopeLow(address,uint64)
- Arguments
{ "newSlope": "11111111111111111", "cometProxy": "0xA17581A9E3356d9A858b789D68B4d866e593aE94" }- Calldata
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setBorrowPerYearInterestRateSlopeHigh(address,uint64)
- Arguments
{ "newSlope": "300000000000000000", "cometProxy": "0xA17581A9E3356d9A858b789D68B4d866e593aE94" }- Calldata
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setSupplyPerYearInterestRateSlopeLow(address,uint64)
- Arguments
{ "newSlope": "20000000000000000", "cometProxy": "0xA17581A9E3356d9A858b789D68B4d866e593aE94" }- Calldata
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setSupplyPerYearInterestRateSlopeHigh(address,uint64)
- Arguments
{ "newSlope": "270000000000000000", "cometProxy": "0xA17581A9E3356d9A858b789D68B4d866e593aE94" }- Calldata
- Target
- 0x1ec6…8779
- Value
- 0 wei
- Function
- deployAndUpgradeTo(address,address)
- Arguments
{ "cometProxy": "0xA17581A9E3356d9A858b789D68B4d866e593aE94", "configuratorProxy": "0x316f9708bB98af7dA9c68C1C3b5e79039cD336E3" }- Calldata
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setBorrowKink(address,uint64)
- Arguments
{ "cometProxy": "0x3D0bb1ccaB520A66e607822fC55BC921738fAFE3", "newBorrowKink": "900000000000000000" }- Calldata
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setBorrowPerYearInterestRateSlopeLow(address,uint64)
- Arguments
{ "newSlope": "11111111111111111", "cometProxy": "0x3D0bb1ccaB520A66e607822fC55BC921738fAFE3" }- Calldata
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setBorrowPerYearInterestRateSlopeHigh(address,uint64)
- Arguments
{ "newSlope": "300000000000000000", "cometProxy": "0x3D0bb1ccaB520A66e607822fC55BC921738fAFE3" }- Calldata
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setSupplyKink(address,uint64)
- Arguments
{ "cometProxy": "0x3D0bb1ccaB520A66e607822fC55BC921738fAFE3", "newSupplyKink": "900000000000000000" }- Calldata
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setSupplyPerYearInterestRateSlopeLow(address,uint64)
- Arguments
{ "newSlope": "20000000000000000", "cometProxy": "0x3D0bb1ccaB520A66e607822fC55BC921738fAFE3" }- Calldata
- Target
- 0x316f…36e3
- Value
- 0 wei
- Function
- setSupplyPerYearInterestRateSlopeHigh(address,uint64)
- Arguments
{ "newSlope": "270000000000000000", "cometProxy": "0x3D0bb1ccaB520A66e607822fC55BC921738fAFE3" }- Calldata
- Target
- 0x1ec6…8779
- Value
- 0 wei
- Function
- deployAndUpgradeTo(address,address)
- Arguments
{ "cometProxy": "0x3D0bb1ccaB520A66e607822fC55BC921738fAFE3", "configuratorProxy": "0x316f9708bB98af7dA9c68C1C3b5e79039cD336E3" }- Calldata
05Tally
Summed from votes
06Voters
| Voter | Choice | % of total | Rationale | ||
|---|---|---|---|---|---|
| 3F0x3fb1…4c8a | For | 104.8K | 14.82% | — | 7mo ago |
| 660x66cd…65f9 | For | 80.2K | 11.34% | — | 7mo ago |
| B30xb356…c826 | For | 60.3K | 8.53% | — | 7mo ago |
| B40xb49f…7948 | For | 60K | 8.49% | — | 7mo ago |
| 050x0579…ca09 | For | 60K | 8.49% | — | 7mo ago |
| 170x1729…b879 | For | 60K | 8.49% | — | 7mo ago |
| B70xb792…89d7 | For | 60K | 8.49% | — | 7mo ago |
| B90xb933…8dd1 | For | 60K | 8.49% | — | 7mo ago |
| D20xd2a7…5a0c | For | 60K | 8.49% | — | 7mo ago |
| 070x0703…961b | For | 51.7K | 7.32% | — | 7mo ago |
| 4F0x4f89…fd3c | For | 50K | 7.07% | — | 7mo ago |
| 9F0x9f77…2768 | For | 0.9 | 0.00% | — | 7mo ago |
| 2F0x2f2f…f78a | For | 0.5 | 0.00% | — | 7mo ago |
07Forum
- WETH Comet Interest Rate Curve Recommendations ↗discourse · high confidence
Arguments for
- Lowering WETH borrow rates prevents forced liquidations and allows borrowers to unwind ETH-leverage positions gradually during volatile market conditions.— Gauntlet
- Reducing rates across all WETH markets keeps Compound's borrowing costs competitive and prevents a sudden spike that could trigger mass unwinding.— Gauntlet
Arguments against
None surfaced.
Unresolved concerns
- Why not apply the same 3% max rate uniformly across all vaults rather than having higher rates (5%) on Ethereum WETH and wstETH?— ico
- How long will it take for the recommended interest rate changes to become effective after governance approval?— ico
- Can the vote timing be accelerated to reduce the period borrowers face the current ~9.5% rate without ability to withdraw collateral and repay debt?— ico
- Will L2 interest rate curve updates be implemented promptly when collateral withdrawals are re-enabled in a few days to prevent bank runs or rate spikes?— ynot
Notable participants
- GauntletProposer and risk advisor providing the interest rate curve recommendations and rationale based on market volatility analysis.
- icoCommunity member raising questions about rate consistency across vaults, implementation timeline, and vote timing.
- ynotCommunity member flagging urgency of L2 governance votes to coincide with planned collateral withdrawal re-enablement.
Generated by Kvorum
08Similar proposals
- compoundcanceledWETH & wstETH Comets Interest Rate Curve Recommendations on Mainnet99%
- compoundexecutedWETH Comets Interest Rate Curve Recommendations on L2 networks94%
- compoundexecuted[Gauntlet] - IR Curve and Incentive Recommendations for Stablecoin and WETH Comets - Part 184%
- compoundexecuted[Gauntlet] - WETH Comet Recommendations (2024-09-27)84%
- compoundexecuted[Gauntlet] Ethereum v3 WETH - Interest Rate Curve Recommendations (04/08/2024)83%
- compoundexecuted[Gauntlet] - IR Curve and Incentive Recommendations for Stablecoin and WETH Comets - Part 382%
- compoundexecutedUpdate Ethereum WETH Comet Borrow Rate IRM82%
- compoundexecuted[Gauntlet] 2023-12-04: Ethereum v3 WETH Interest Rate Curve Recommendations81%
- compoundexecuted[Gauntlet] Interest Rate and Rewards Recommendation for WETH Comet on BASE (06/03/2024)81%
- compoundexecuted[Gauntlet] Base V3 WETH Comets - Interest Rate Curve & Reward Recommendations (04/01/24)78%