As part of Gauntlet’s ongoing risk monitoring, we regularly review and recommend enhancements to Euler market parameters to better align the protocol with broader ecosystem developments while keeping user utility in mind.
As of March 24, the Dai Savings Rate and Sky Savings Rate were both reduced by 2 percentage points, from 5.5% to 3.5%, and 6.5% to 4.5%, respectively. These rates represent the annualized yield for stakers of DAI and USDS through Sky (formerly Maker), and are commonly referenced as an analog of a “risk free” rate in DeFi.
We expect the lowering of these rates to impact yields in lending protocols as arbitrageurs continually close the gap between loan/borrow spreads of large cap assets. Further, the largest Euler governed stablecoin vault, USDC Prime, is supply incentivized yet underutilized at just under 50%. As such, we believe it prudent to lower the kink borrow APY by 1%, from 6% to 5%, which corresponds to a (bare) supply APY of 4.5% at the current reserve factor, equal to the present SSR. In the medium term this will keep net supply APY lucrative while encouraging more borrows and higher utilization. Corresponding changes are recommended across stablecoin vaults.
The WETH Prime vault is similarly supply incentivized but underutilized at about 76%. Therefore we also recommend a slight reduction of kink borrow APY from 2.7% to 2.4% to further improve capital efficiency.
Supply cap increases are recommended where cap usage is approaching capacity and sufficient atomic liquidity exists to absorb long tail selloff.
Euler Prime
Interest Rate Curve Recommendations
| Asset | Current Kink Borrow APY | New Kink Borrow APY | Current Max Borrow APY | New Max Borrow APY | Current Kink | New Kink |
|---|---|---|---|---|---|---|
| USDS | 6.0% | 5.0% | 80% | 80% | 90% | 90% |
| USDC | 6.0% | 5.0% | 80% | 80% | 90% | 90% |
| USDT | 6.0% | 5.0% | 80% | 80% | 90% | 90% |
| WETH | 2.7% | 2.4% | 80% | 80% | 90% | 90% |
Euler Yield
Cap Recommendations
| Asset | Parameter | Current Value | New Value |
|---|---|---|---|
| sUSDe | Supply Cap | 8,000,000 | 16,000,000 |
Interest Rate Curve Recommendations
| Asset | Current Kink Borrow APY | New Kink Borrow APY | Current Max Borrow APY | New Max Borrow APY | Current Kink | New Kink |
|---|---|---|---|---|---|---|
| USDC | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| USDT | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| wM | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| PYUSD | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| DAI | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| FDUSD | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| USDS | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| USD0 | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| RLUSD | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| USDe | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
Euler Base
Interest Rate Curve Recommendations
| Asset | Current Kink Borrow APY | New Kink Borrow APY | Current Max Borrow APY | New Max Borrow APY | Current Kink | New Kink |
|---|---|---|---|---|---|---|
| EURC | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| USDC | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| USDS | 7.5% | 6.5% | 80% | 80% | 90% | 90% |
| WETH | 2.5% | 2.4% | 80% | 80% | 85% | 90% |
Next Steps
- We welcome community feedback