Overview
Chaos Labs provides a review of stablecoin utilization and interest rates on the Venus protocol. Based on our observations, we provide a recommendation to adjust IR curves.
Interest Rate Analysis
We have observed consistent decreasing utilization on Venus (as well as throughout DeFi) in the past two months, though this trend has reversed somewhat in recent weeks following a market rally.
The chart below shows the utilization of stablecoins on each chain, weighted by the amount of each asset borrowed (i.e. USDT factors more heavily into the BNB line than does USDD).
Save for sharp and transient increases associated with Binance Launchpool events and rallies, the chart shows a consistent downtrend in utilization, though smaller deployments like Unichain have demonstrated sharp fluctuations.
A closer examination of BNB Chain markets reveals that the downtrend has been displayed across all of the largest stablecoin markets; USDC and FDUSD have demonstrated the sharpest increases in utilization during Launchpool events, while the utilization of smaller assets has been volatile.
This points to a need to lower borrowing rates to boost utilization across the protocol.
We recommend setting the rate at 80% utilization — Kink 1 for USDC and USDT — to 8%, allowing the market to slide into the rate discovery zone (between Kinks 1 and 2) at times of higher utilization.
BNB Reserve Factor
Recent changes to BNB’s IR curve have not had a meaningful effect on the amount of BNB supplied, with the reduction in total supply almost entirely accounted for by the Exploiter account, which has been liquidated over the course of the last month. These liquidations are visible in the chart below in the blue lines.
We can see that the decreases in supply were thus the result of these liquidations.
Taking into account that users have not been highly sensitive to decreases in supply APY as a result of changes in the IR curve, we recommend increasing the market’s RF from 10% to 30% to generate more protocol revenue and provide a greater insurance buffer.
Recommendation
We recommend aligning this Multiplier across all active and borrowable stablecoins on Venus, significantly improving the user experience by providing a predictable IR curve. In some isolated pools with riskier collateral assets there is a base rate of 0.02; we recommend leaving this as is. Additionally, we recommend implementing the Two Kink model for all USDC and USDT Core markets, aligning the 2nd Multiplier at 0.7. We do not recommend any changes to the JumpMultiplier and thus have excluded it from the table below.
Our previous IR curve proposal, which established the Two Kink model and and increased the Multiplier for a number of stablecoins, can be found here.
Specification
| Symbol | Market | Base Rate | 1st Multiplier | Kink | 2nd Multiplier | 2nd Kink |
|---|---|---|---|---|---|---|
| USDC | Arbitrum-Core | 0 | 0.10 | 80% | 0.7 | 90% |
| USDT | Arbitrum-Core | 0 | 0.10 | 80% | 0.7 | 90% |
| USDC | Base-Core | 0 | 0.10 | 80% | 0.7 | 90% |
| FDUSD | BNB-CorePool | 0 | 0.10 | 80% | - | - |
| USDC | BNB-CorePool | 0 | 0.10 | 80% | 0.7 | 90% |
| DAI | BNB-CorePool | 0 | 0.10 | 80% | - | - |
| TUSD | BNB-CorePool | 0 | 0.10 | 80% | - | - |
| USDT | BNB-CorePool | 0 | 0.10 | 80% | 0.7 | 90% |
| USDT | BNB-DeFi | 0.02 | 0.10 | 80% | - | - |
| USDD | BNB-DeFi | 0.02 | 0.10 | 70% | - | - |
| USDT | BNB-GameFi | 0.02 | 0.10 | 80% | - | - |
| USDD | BNB-GameFi | 0.02 | 0.10 | 70% | - | - |
| USDT | BNB-Meme | 0 | 0.10 | 80% | - | - |
| USDD | BNB-Stablecoins | 0.02 | 0.10 | 70% | - | - |
| USDT | BNB-Stablecoins | 0 | 0.10 | 80% | - | - |
| lisUSD | BNB-Stablecoins | 0.02 | 0.10 | 50% | - | - |
| USDD | BNB-Tron | 0.02 | 0.10 | 70% | - | - |
| USDT | BNB-Tron | 0.02 | 0.10 | 80% | - | - |
| USDS | Ethereum-Core | 0 | 0.10 | 80% | - | - |
| USDC | Ethereum-Core | 0 | 0.10 | 80% | 0.7 | 90% |
| crvUSD | Ethereum-Core | 0 | 0.10 | 80% | - | - |
| FRAX | Ethereum-Core | 0 | 0.10 | 80% | - | - |
| DAI | Ethereum-Core | 0 | 0.10 | 80% | - | - |
| USDT | Ethereum-Core | 0 | 0.10 | 80% | 0.7 | 90% |
| TUSD | Ethereum-Core | 0 | 0.10 | 80% | - | - |
| crvUSD | Ethereum-Curve | 0 | 0.10 | 80% | - | - |
| USDC | Ethereum-Ethena | 0 | 0.10 | 92% | - | - |
| USDT | opBNB-Core | 0 | 0.10 | 80% | - | - |
| FDUSD | opBNB-Core | 0 | 0.10 | 80% | - | - |
| USDC | Unichain-Core | 0 | 0.10 | 80% | 0.7 | 90% |
| USDC.e | ZkSync-Core | 0 | 0.10 | 80% | 0.7 | 90% |
| USDT | ZkSync-Core | 0 | 0.10 | 80% | 0.7 | 90% |
| USDC | ZkSync-Core | 0 | 0.10 | 80% | 0.7 | 90% |
| Symbol | Market | Current RF | Recommended RF |
|---|---|---|---|
| BNB | BNB Core | 10% | 30% |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.