AIP #48 - Increase Ethereum Mainnet cauldrons interest rates to 15% across the board
Tl;dr Adjust interest across the board for all Ethereum Mainnet Cauldrons to meet the 15% mark, which currently represents the risk free borrow interest rate in DeFi.
Introduction
The upcoming proposal aims to tackle a crucial decision concerning Abracadabra Money’s cauldrons operations. With the recent surge in lending interest rates across various DeFi protocols, it’s clear that aligning our interest rates across Ethereum’s diverse market offerings with the prevailing rates in the DeFi ecosystem is essential.
As a result, this proposal suggests raising interest rates to 15% across all available markets on Ethereum. This strategic move not only brings us in line with industry standards but also strengthens our DAO revenue and addresses the ongoing stress surrounding the MIM peg.
Your input on this proposal is invaluable as we strive to make informed decisions for Abracadabra Money’s future.
Borrowing funds in both Decentralized and centralized avenues in the current market is an expensive endeavor, and our DAO should align itself with its competitors in order to raise its revenue.
The Proposal
The current proposal can easily be executed thanks to the variable nature of Abracadabra’s interests. If this proposal was to pass the DAO Treasury address is able to raise the rate at which user’s debt grows every year, effectively increasing the base interest for a predefined cauldron.
The Main increased cauldrons would currently be:
- Cvxtricrypto
- yvWETH
This increase would be applied to all other cauldrons that have MIM borrowed on Ethereum Mainnet.
The lending interest rates in these longstanding markets are presently inadequate and fail to compete effectively with the risks associated with the DAO accepting these assets as collateral.
Setting the rate at 15% ensures that our platform remains among the most favorable options for borrowing against these assets. This adjustment not only boosts revenues but also enhances the DAO’s competitive standing.
Should this proposal gain approval, both markets would generate annual revenues exceeding 1.5M MIM each for the DAO, appropriately valuing their significance and skyrocketing SPELL holders revenues and APYs.
Interest Rate Landscape:
MakerDAO: DAI currently offers 15% APY on the DAI Savings Rate, as well as 16% interest to borrow against your plain staked ETH. Source.
Aave: Current borrow rates for USDC, USDT on Arbitrum are 25% and 21% respectively.
Prisma: Prisma allows you to borrow mkUSD against your LSTs at 15%.
Considering the interest rate landscape above, we feel that we are mispricing the current value of leverage in the markets. As such, we would like to increase borrow rates to 15%.
Voting
Voting Will start Wednesday, 27/03/24 at 16:00 CET and last 72 hours.
Following Amendments would require only a 24 hour voting period to make sure that the DAO is smooth in raising and reducing interests to remain competitive.
Snapshot vote can be found here.
The proposal has passed.