eIP 2: Amend Interest Rate models

  • Title: Amend Interest Rate models
  • Author(s): Seraphim Czecker
  • Submission Date: 21.02.2022

Simple Summary

This proposal includes changes to interest rate models on the following assets: USDC, DAI, WETH, USDT, UNI and LINK.


This is a proposal to amend the interest model on the following assets: USDC, DAI, WETH, USDT, UNI and LINK. Currently, all assets on Euler are following the default interest rate model, which was originally created for the riskier, default isolated assets. However, given the high quality nature of those assets, it is appropriate to bring the interest rates in line with the market as the current rates are too high.


The goal of the proposal is to boost the capital efficiency and utility of the Euler protocol. The current risk factors on the protocol are purposefully restrictive as a part of Euler’s soft-launch in late Dec 2021. Since then, the protocol has performed well against a backdrop of extreme price volatility and a large number of liquidations across DeFi. Furthermore, there have been no reports of any critical bugs on the protocol in spite of a $1m public bug bounty being live for nearly a month. Amending the interest rate models will create a more competitive rate market in DeFi without increasing risks to the protocol.


Proposed change:

Asset Base IR Kink IR Max IR Kink%
USDC 0% 4% 100% 80%
WETH 0% 4% 100% 80%
DAI 0% 4% 100% 80%
USDT 0% 4% 100% 80%
UNI 0% 20% 300% 80%
LINK 0% 20% 300% 80%

Current rate model:

Asset Base IR Kink IR Max IR Kink%
Default 0% 10% 300% 50%

Base IR is the APY at 0% utilisation; Kink IR is the APY at Kink%, Max IR is the APY at 100% utilisation, Kink% is the utilisation level where the slope becomes steeper


Contract Method Token Token Name Token Address Updates
Governance setIRM USDC USD Coin 0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48 interestRateModel:STABLE
Governance setIRM WETH Wrapped Ether 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2 interestRateModel:STABLE
Governance setIRM DAI Dai Stablecoin 0x6B175474E89094C44Da98b954EedeAC495271d0F interestRateModel:STABLE
Governance setIRM USDT Tether USD 0xdAC17F958D2ee523a2206206994597C13D831ec7 interestRateModel:STABLE
Governance setIRM UNI Uniswap 0x1f9840a85d5aF5bf1D1762F925BDADdC4201F984 interestRateModel:MAJOR
Governance setIRM LINK ChainLink Token 0x514910771AF9Ca656af840dff83E8264EcF986CA interestRateModel:MAJOR


Voting yes signals approval of the suggested implementation.

Risk Assessment

Assuming the current utilisation in the respective pools, the proposal is unlikely to lead to liquidations as borrow APYs will decrease on every asset. Furthermore, the assets are some of the most established tokens in DeFi and hence lower APYs do not present substantial risk even if the proposal ultimately stimulates higher utilisation.

Here is a breakdown of changes to the Borrow APYs given the same utilisation:

Asset Base IR Kink IR Max IR Kink% Current Utilisation Current Borrow APY New Borrow APY
USDC 0% 4% 100% 80% 33.10% 6.62% 1.66%
WETH 0% 4% 100% 80% 27.67% 5.53% 1.38%
DAI 0% 4% 100% 80% 49.41% 9.88% 2.47%
USDT 0% 4% 100% 80% 23.51% 4.70% 1.18%
UNI 0% 20% 300% 80% 0% 0% 0%
LINK 0% 20% 300% 80% 0% 0% 0%

Therefore, we think the change is appropriate.


A reasonable proposal and surely agree with it

it is a reasonable proposal and the current apy for these are quite high, I would love to see it drop. in addition, it will encourage more people to borrow


Proposal approved. The interest rates dropped indeed, but we they’ll hopefully go back up once the market catches up and EUL distribution begins.