eIP 27: Update the USDT interest rate model

Simple Summary

This proposal offers to update the USDT interest rate model by changing the Kink IR from 20% to 7% and the Max IR from 300% to 200%.


Current interest rate model

Asset Base IR % Kink IR % Max IR % Kink %
USDT 0.00 20.00 300.00 0.80

Proposed interest rate model

Asset Base IR % Kink IR % Max IR % Kink %
USDT 0.00 7.00 200.00 0.80

Motivation and analysis

USDT currently uses the Major interest rate model with a 20% Kink IR and a 300% Max IR. The Major interest rate model is currently applied to assets such as ENS, RBN, PERP, and 1INCH. This model is not well suited to stablecoins due to its high kink interest rate of 20% and high maximum interest rate of 300%.

As a comparison, the USDC and DAI interest rate kinks are situated at 4%. USDT’s high Kink IR made it uneconomical for the market to reach high utilization. For example, the market’s utilization has remained between 27% and 40% for most of the last 30 days whereas USDC and DAI utilization ranged between 60% and 80%.

Lower utilization implies a larger spread between borrowers and lenders. This is because the interest borrowers pay is distributed across all lent assets. Lower utilization rates make markets less capital efficient for lenders.

Despite the lower utilization, borrowers have been borrowing USDT at rates varying between 6.5% and 9.5% for the last 30 days. This shows that there is a lot of market demand to borrow USDT at relatively high-interest rates.

Assuming borrowers will continue to borrow at similar rates, the utilization of the pool would increase from 27-40% to approximately 80% by lowering the Kink IR from 20% to 7%.

Assuming a 7% borrow rate, this means that lenders will now earn 7% x 80% x 0.95 = 5.3% compared to 1.9% at 28% utilization given the current interest rate model. This represents a 2.8x increase in supply rates for lenders. Such an increase in capital efficiency is expected to drive additional capital inflows and more borrowing activity leading to more fees for the DAO. This change would also make Euler’s USDT market more competitive.

Lowering the Max IR from 300% to 200% will also contribute to making borrowing rates less volatile. The proposed Max IR of 200% for USDT is higher than USDC and DAI Max IRs thereby mitigating the market’s liquidity risk in case of high utilization.

The objective of this proposal is to increase the capital efficiency of the USDT market while mitigating the market’s liquidity risks.


Updating the USDT interest rate model will lead to higher market utilization and tighter spreads between borrowing and lending rates. This proposal would benefit the DAO and its users by making the protocol more capital efficient.


Options are:

  • YES - implement the changes above
  • NO - do not implement the changes above


Link to voting here: Snapshot


Agree 100%. USDT should be treated the same as the other big stablecoins.

1 Like

In full support of this. Seems like a no-brainer.

1 Like

Agree with the proposal! As I pointed out on the previous proposal to grant collateral status to USDT, for ordinary user there is no difference between USDC and USDT.

1 Like

Agreed 100% USDT should have a better rate model applied to it.

1 Like

Thanks to everyone for the feedback. We’ll post the snapshot vote for this proposal in 24h.