Rates Changes Proposal 2 Mar 2021

Authors: @Primoz @LongForWisdom, @Monet-supply, @SebVentures, @hexonaut, @Akiva, @ultraschuppi


Source: Risk Premiums & Competitive Rates March 2021

Table Notes:

  • Competitive rates are based on lowest stablecoin borrow rates on each lending venue for particular collateral, except when stablecoins are used as collateral (in such case only DAI borrow rate is compared)
  • Negative competitive rates are mostly due to liquidity mining rewards at Compound & Cream and due to rates and rewards accrued on deposited collateral
  • Lending products between secondary lenders and MakerDAO are not standardized and therefore rates can not be strictly compared.

Competitive Landscape

The rates at competing defi lenders increased in the first three weeks of February, but then decreased by ~5% in the last week due to the sharp drop on all crypto assets.

Source: loanscan.io

Proposed Rate Changes

MANA-A SF: decrease from 5.0% to 4.0%


While the debt exposure almost doubled to 1MM in the last month, the liquidity also improved a lot on MANA. This allows us to decrease the Stability Fee to encourage more minting of DAI.

UNIV2WBTCDAI-A: decrease from 3.0% to 2.0%

So far no DAI has been minted with this LP-collateral. Since it is a DAI-based LP-token, we think it makes sense to decrease the Stability Fee a bit to see if this stimulates minting.

RENBTC-A: decrease from 6.0% to 5.0%


Ren just got acquired by Alameda which decreases the counterparty and custody risk of RenBTC. RENBTC is - while still probably a bit riskier than WBTC - a good way to diversify our BTC-exposure. Decreasing the Stability Fee should hopefully help on getting some more debt exposure for this collateral.

ETH-based UniV2LP-tokens: increase by 1%

We want to increase the Stability Fee for all ETH-based UniV2LP-tokens by 1% for two reasons: We increased the Stability Fee for ETH-A/ETH-B in the Mid-Month Rates Changes Proposal by 1/1.5% and auctions on LP-Tokens have been performing a bit worse than other auctions.

Impact on the Stability Fees:

  • UNIV2DAIETH-A: increase from 2.0% to 3.0%
  • UNIV2USDCETH-A: increase from 2.5% to 3.5%
  • UNIV2WBTCETH-A: increase from 3.5% to 4.5%
  • UNIV2ETHUSDT-A: increase from 4.0% to 5.0%
  • UNIV2LINKETH-A: increase from 4.0% to 5.0%
  • UNIV2UNIETH-A: increase from 4.0% to 5.0%
  • UNIV2AAVEETH-A: increase from 4.0% to 5.0%

No change

ETH-A: No changes (5.5% SF)


After a last week’s market correction, DAI debt on major collateral assets decreased and DAI demand increased as vaults deleveraged their positions. This also had an effect on DAI minting from USDC. In the current situation where crypto prices seem to be moving in a side-ways pattern we don’t foresee a rate increase. However if prices start increasing again with the same pace observed in the last few months and debt growth continues, we may need to react on rate increase, potentially before next month’s rate meeting.

ETH-B: No changes (9.0% SF)

Same as ETH-A, no change for now.

ETH-C: No changes (3.5% SF)

Same as ETH-A, no change for now.

WBTC-A: No changes (4.5% SF)

No changes are proposed

BAT-A: No changes (6.0% SF)

No changes are proposed

KNC-A: No changes (2.0% SF)

No changes are proposed

ZRX-A: No changes (2.0% SF)

Debt exposure has increased significantly, but mostly by one vault (4MM) that seems to use every existing DeFi product and has a net-worth of >300MM. Although the newly calculated risk premium is at 7% we may not want to cause losing this user (and potentially others) by increasing the rate and lowering it thereafter.

LINK-A: No changes (3.5% SF)

No changes are proposed.

COMP-A: No changes (3.0% SF)

No changes are proposed.

LRC-A: No changes (3.0% SF)

No changes are proposed.

BAL-A: No changes (3.5% SF)

No changes are proposed.

YFI-A: No changes (5.5% SF)

The debt exposure has increased significantly, but mostly from one big vault with a CR of >450% (yearn treasury) which doesn’t severely affect risk premium. No changes are proposed.

UNI-A: No changes (3.0% SF)

No changes are proposed.

AAVE-A No changes (4.0% SF)

No changes are proposed.

USDC-A, TUSD-A, PAX-A, GUSD-A, USDT-A: No changes (0.0% SF)

No changes are proposed.

Final Note

The market has cooled down significantly in the last weeks, which is one major driver for not making any big changes on the Stability Fees. If the debt exposure is growing with the same rate as in the beginning of the month, we will need to propose changes to the rates before the next usual meeting.

Proposed SFs will get included into next week’s on-chain poll on 2021-03-07T23:00:00Z, and if passed will be included in an executive vote on 2021-03-11T23:00:00Z.

16 Likes

Nice. LP Vaults SF rising but slightly discounted and vaults with DAI in them do have a discount.

UNIV2DAIETH-A could possibly be lowered 25-50 bps, not a big deal as we have the 3m DAI DC currently.

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