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 |
