eIP 5: Amend Borrow Factors and Interest Rate Models

  • Title: Amend Borrow Factors and Interest Rate Models
  • Author(s): Seraphim Czecker
  • Submission Date: 10.03.2022

Simple Summary

Proposal includes a batch of changes to the MATIC, CVX, 1INCH, SHIB, AGEUR, oSQTH, ENS, RBN, USDT, PERP, AXS assets on Euler. These include increasing borrow factors, changing the interest rate models and upgrading assets to cross tier.


This is a proposal to increase the borrow factors on MATIC, CVX, 1INCH, SHIB, AGEUR, oSQTH, ENS, RBN, PERP, AXS on Euler, enabling Euler users to borrow more of these assets against eligible collateral. These assets fit the criteria necessary for higher capital efficiency. They’re backed by robust oracles on Uniswap v3. They’re significantly distributed and decentralised. They have relatively high liquidity on numerous decentralised exchanges. Smart contract risk is relatively low. The proposal also includes a change to its interest rate model. These changes would bring the interest rates in line with competing protocols. On the upside, this would increase capital efficiency and provide more utility for users. On the downside, improving the borrow factors makes attacking the lending pools easier, albeit not systemic. In this particular case, the benefits outweigh the potential risks. Additionally, this proposal includes making MATIC, CVX, SHIB, AGEUR, oSQTH, ENS, RBN, USDT, PERP, AXS cross tier assets.


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. Improving the borrow factors and the interest rate models on the mentioned assets is one of the first steps in ramping up capital efficiency in a risk-managed fashion on Euler.


1. What is the link between the eIP author and the asset(s)?

None. The proposer is the head of risk at Euler Finance and has no link to the assets.

2. Provide a brief description of the asset(s) and the underlying protocols.

  • MATIC is the gas, governance and network security token of the Polygon network.
  • CVX can be staked on Convex Finance to earn a share of Curve LP’s CRV earnings. Curve is a popular AMM.
  • 1inch token is the governance token for the 1inch ecosystem. 1inch is a popular DEX aggregator.
  • SHIB is a popular meme token.
  • agEUR is a stablecoin of the Angle Protocol whose value is pegged to the Euro.
  • oSQTH is the tokenised perpetual option on ETH developed by the Opyn team.
  • ENS holders govern the Ethereum Name Service, a protocol for human-readable crypto addresses and decentralized domain names.
  • RBN is the governance token of Ribbon Finance. Ribbon is a structured product protocol.
  • USDT is a popular stablecoin.
  • PERP is the governance token of Perpetual Protocol. Perpetual protocol is an AMM for perpetual derivative contracts.
  • AXS is the governance token of the popular Axie Infinity Blockchain-based game.

3. Explain why the eIP would benefit Euler’s ecosystem?

The proposed changes apply to established assets in DeFi and would unleash more capital efficiency as users will be able to borrow more against their collateral.

Borrowing oSQTH in particular would be closer to shorting it on Opyn in terms of capital efficiency.

4. Where do the assets trade?

All of these assets trade on major DeFi AMMs and most on CeFi exchanges as well. Consequently, it would allow liquidators to relatively easily buy these assets to repay debt in the event of liquidations.

5. What are the volumes and market capitalisations?

All assets have substantial volumes on various exchanges and market caps.

6. What is the liquidity like in the Uniswap V3 liquidity pool versus ETH?

XYZ/WETH Uniswap V3 pools have sufficient TVL and are spread across the entire price range.

7. What security/auditing reports have been done?

All the projects have undergone auditing by reputable firms and/or stood the test of time.

Proposed Interest Rate Change:

Asset Base IR Kink IR Max IR Kink%
MATIC 0% 20% 300% 80%
CVX 0% 20% 300% 80%
1INCH 0% 20% 300% 80%
SHIB 0% 20% 300% 80%
AGEUR 0% 4% 100% 80%
OSQTH 0% 20% 300% 80%
ENS 0% 20% 300% 80%
RBN 0% 20% 300% 80%
PERP 0% 20% 300% 80%
AXS 0% 20% 300% 80%

Current Interest Rate Model:

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

Proposed Borrow Factor Change:

Asset Proposed Borrow Factor
MATIC 0.66
CVX 0.50
1INCH 0.50
SHIB 0.50
AGEUR 0.50
OSQTH 0.56
ENS 0.66
RBN 0.50
PERP 0.50
AXS 0.66

Current Borrow Factors:

Asset Current Borrow Factor
MATIC 0.28
CVX 0.28
1INCH 0.28
SHIB 0.28
AGEUR 0.28
OSQTH 0.28
ENS 0.28
RBN 0.28
PERP 0.28
AXS 0.28

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 setAssetConfig MATIC Polygon 0x7d1afa7b718fb893db30a3abc0cfc608aacfebb0 borrowIsolated:false, borrowFactor:0.66
governance setIRM MATIC Polygon 0x7d1afa7b718fb893db30a3abc0cfc608aacfebb0 IRM:MAJOR
governance setAssetConfig CVX Convex Finance 0x4e3fbd56cd56c3e72c1403e103b45db9da5b9d2b borrowIsolated:false, borrowFactor:0.5
governance setIRM CVX Convex Finance 0x4e3fbd56cd56c3e72c1403e103b45db9da5b9d2b IRM:MAJOR
governance setAssetConfig SHIB Shiba Inu 0x95ad61b0a150d79219dcf64e1e6cc01f0b64c4ce borrowIsolated:false, borrowFactor:0.5
governance setIRM SHIB Shiba Inu 0x95ad61b0a150d79219dcf64e1e6cc01f0b64c4ce IRM:MAJOR
governance setAssetConfig AGEUR agEUR 0x1a7e4e63778b4f12a199c062f3efdd288afcbce8 borrowIsolated:false, borrowFactor:0.5
governance setIRM AGEUR agEUR 0x1a7e4e63778b4f12a199c062f3efdd288afcbce8 IRM:STABLE
governance setAssetConfig oSQTH Opyn Squeeth 0xf1b99e3e573a1a9c5e6b2ce818b617f0e664e86b borrowIsolated:false, borrowFactor:0.56
governance setIRM oSQTH Opyn Squeeth 0xf1b99e3e573a1a9c5e6b2ce818b617f0e664e86b IRM:MAJOR
governance setAssetConfig ENS Ethereum Name Servi 0xc18360217d8f7ab5e7c516566761ea12ce7f9d72 borrowIsolated:false, borrowFactor:0.66
governance setIRM ENS Ethereum Name Servi 0xc18360217d8f7ab5e7c516566761ea12ce7f9d72 IRM:MAJOR
governance setAssetConfig RBN Ribbon Finance 0x6123b0049f904d730db3c36a31167d9d4121fa6b borrowIsolated:false, borrowFactor:0.5
governance setIRM RBN Ribbon Finance 0x6123b0049f904d730db3c36a31167d9d4121fa6b IRM:MAJOR
governance setAssetConfig USDT Tether 0xdac17f958d2ee523a2206206994597c13d831ec7 borrowIsolated:false
governance setIRM USDT Tether 0xdac17f958d2ee523a2206206994597c13d831ec7 IRM:MAJOR
governance setAssetConfig PERP Perpetual Protocol 0xbc396689893d065f41bc2c6ecbee5e0085233447 borrowIsolated:false, borrowFactor:0.5
governance setIRM PERP Perpetual Protocol 0xbc396689893d065f41bc2c6ecbee5e0085233447 IRM:MAJOR
governance setAssetConfig AXS Axie Infinity 0xbb0e17ef65f82ab018d8edd776e8dd940327b28b borrowIsolated:false, borrowFactor:0.66
governance setIRM AXS Axie Infinity 0xbb0e17ef65f82ab018d8edd776e8dd940327b28b IRM:MAJOR
governance setAssetConfig 1INCH 1inch 0x111111111117dc0aa78b770fa6a738034120c302 borrowFactor:0.5
governance setIRM 1INCH 1inch 0x111111111117dc0aa78b770fa6a738034120c302 IRM:MAJOR

Risk Assessment

Oracle Grading

According to our inhouse research, meaningful attacks on the XYZ/WETH Uniswap V3 oracles appear unfeasible. The substantial TVL spread across the entire price range is able to prevent both artificially elevated and depressed oracle prices.

We therefore give MATIC, CVX, 1INCH, SHIB, AGEUR, oSQTH, ENS, RBN, USDT, PERP, AXS a strong oracle rating.

For more details, check out the full report.


While not all assets score high on decentralisation, it’s sufficient enough to support capital efficiency improvements proposed in this eIP.


All assets exhibit manageable realised volatility versus WETH.


The assets are listed on multiple exchanges (both CeFi and DeFi) with decent volumes occurring on both, apart from oSQTH and agEUR which mostly trade on DeFi AMMs. Given the depth of liquidity pools and order books, it is unlikely that liquidating users in an adverse scenario will be challenging given Euler’s Dutch auction mechanism on liquidation bonuses.

Smart Contract Risk

All the projects have undergone auditing by reputable firms and/or stood the test of time.

Interest Rate changes

Asset Base IR Kink IR Max IR Kink% Current Utilisation Current Borrow APY New Borrow APY
MATIC 0% 20% 300% 80% 0.00% 0.00% 0.00%
CVX 0% 20% 300% 80% 0.01% 0.00% 0.00%
1INCH 0% 20% 300% 80% 0.19% 0.04% 0.05%
SHIB 0% 20% 300% 80% 0.00% 0.00% 0.00%
AGEUR 0% 4% 100% 80% 0.00% 0.00% 0.00%
OSQTH 0% 20% 300% 80% 2.21% 0.44% 0.55%
ENS 0% 20% 300% 80% 0.41% 0.08% 0.10%
RBN 0% 20% 300% 80% 0.00% 0.00% 0.00%
PERP 0% 20% 300% 80% 0.00% 0.00% 0.00%
AXS 0% 20% 300% 80% 0.00% 0.00% 0.00%

The proposed rate changes won’t significantly affect the current interest rates.


Since this eIP is primarily about increasing borrow factors and promoting assets to cross tier as opposed to promoting assets to collateral status, it bears less systemic risk. While these changes create more systemic risks, they are balanced given the high quality nature of the assets and the nature of the eIP.

After careful consideration, we recommend approving this eIP.

Relevant Links

Oracle grading tool: https://oracle.euler.finance/


happy to see $matic listed…

1 Like

support eIP 5: Amend Borrow Factors and Interest Rate Models

1 Like

Great to see Euler integrating with Opyn. I support eIP 5 as proposed.