[VIP] Changing the interest rate parameters for VAI

Venus Governance Venus - Governance Proposals
1

Rationale

This VIP proposes a new set of parameters for VAI based on this discussion.

References

Summary

Increase the steepness of the interest rate curve of VAI to incentivize VAI close to $1.

Motivation

  • Harden the peg by making it expensive to borrow VAI when the VAI price is low.
  • Provide a better rate for borrowers when VAI is at $1.

Specification

Modification of this VIP:

  • baseRate: 3% (from 4%)
  • floatRate: 4000% (from 225%)

We provide below an exemple of the implication of the changes:
image

This VIP doesn’t enable VAI borrowings, this will be enabled in a following VIP contingent to having a significant healthy buffer in the VAI USDT PSM.

Risk Analysis

  • Reduction of earnings if VAI stays at $1
  • Increasing the VAI borrow rate might reduce VAI borrowings and TVL

Read the Steakhouse disclaimers

2

Nice, this is is a good way to go

1 Like
3

Proposal on vote tomorrow here.

Please make your voice heard.

4

The proposal was put into action. The interest rate on VAI borrowing was increased significantly as VAI remains quite below the target peg most of the time. This is increasing Venus revenues.

We are monitoring the situation and found that part of the issue is the limited liquidity on USDT<->VAI Binance pair (not that it is better on Pancakeswap v3). The bid/ask spread is quite significant.

As for now, no significant borrower have repaid their debt. We want to remind that VAI liquidity to repay your debt is not an issue if using the VAI PSM.

We will continue to do what we can to help liquidity propagation between those venues (hence reduce price fluctuation) and will use our next payment to provide VAI liquidity.

Read the Steakhouse disclaimers