BNB Market 2 Kink IRC Proposal

Proposals
1

Summary

This proposal introduces a 2 kink model for the BNB Interest Rate Curve to optimize market utilization and borrow APY, particularly during launchpool events. The change is expected to make borrowing more predictable for users, aiming to increase participation and market utilization.

Suggested Change Table:

Slope Kink Base Rate Multiplier Jump Multiplier
First Slope 0.4 0 0.225 -
Second Slope 0.7 0.1 0.5 6.8

Details

The current market parameters, with a single kink at 50%, limit user participation due to the sharp increase in borrow APY with utilizations after the kink. This also makes the borrow APY unpredictable, as small changes in utilization can lead to significant variations in APYs.

Analysis of user behavior throughout 2024 shows that during launchpool events, users are more inclined to borrow despite higher interest rates. Market utilization during these events averaged 64%, with an average borrow APY of 35%, compared to just 16% utilization and a 3% borrow APY during non-launchpool periods.

Event AVG Borrow APY AVG Utilization AVERAGE of Total Supply (BNB) AVERAGE of Total Borrows (BNB)
Launchpool 35% 64% 1,029,853 733,342
Non-Launchpool 3% 16% 897,799 169,281

Proposed Solution:

  • Implement a two-kink model to optimize market dynamics during launchpool events.
  • Set the second kink based on historical averages of market utilization and borrow APY, reflecting higher demand during these periods.
  • Improve user control over borrow APY during launchpool events, making borrowing costs more predictable.
  • Maintain the same parameters for market conditions during non-launchpool events to avoid impacting the current market dynamics.
Slope Kink Base Rate Multiplier Jump Multiplier
First Slope 0.4 0 0.225 -
Second Slope 0.8 0.1 0.3 5

3 Likes
2

It sounds interesting, i would like to see it in action during the Launchpools.

3

Chaos Labs endorses the proposed 2-kink model for the BNB Interest Rate Curve. We look forward to the positive impact this initiative will have on the protocol.

1 Like
4

Update on 2-Kink Model Parameters

After analyzing the latest launchpool performance, we are recommending some changes to the parameters of the 2-Kink model. The updated parameters aim to optimize rate predictability and improve APY in both supply and borrow markets based on recent market activity.

The suggested changes are detailed in the table below:

Slope Kink Base Rate Multiplier Jump Multiplier
First Slope 0.4 0 0.225 -
Second Slope 0.7 0.21 0.35 5

To further illustrate the impact, here is a visual representation of the revised APY curves:


Please feel free to share your feedback on these proposed updates.

5

Chaos Labs reviewed the suggested changes and supports this.