Base stable rate oracle update and improvements in Aave V2

Reading time saved: 2 minutes

2 replies, 2935 views, 13 likes



The discussion focused on the Aave V2 protocol's aggressive Interest Rate (IR) leading to an increased share of stable rates for all stablecoins, potentially compromising risk management benefits. Emilio proposed short-term and long-term solutions to address this, but Carlsagin22 expressed concerns about the potential negative impact on the protocol's competitiveness.

The discussion primarily revolved around the implementation of the Aave V2 protocol and its more aggressive Interest Rate (IR) for stable and variable rates. Emilio pointed out that this has led to a significant increase in the share of stable rates for all stablecoins, which could be problematic as the stable rate only rebalances under stressed conditions, thereby losing some of the risk management benefits of the variable rate1.

To address this, Emilio proposed two solutions: a short-term fix to manually override the lending rate oracle and impose a base stable rate of 7%, and a long-term fix to eliminate the Lending rate oracle completely by algorithmically setting the spread between the stable rate and variable rate1. He later updated that the design of the new IR strategy has been completed and an implementation is in progress. Additionally, due to increased demand for stablecoins, the rate oracle will increase by 2 points for USDC and 3 points for DAI, TUSD, and USDT2.

However, not everyone agreed with this approach. Carlsagin22 expressed concerns, arguing that it could endanger the protocol and give competitors a significant point of differentiation. He urged the team to reconsider this path, as he believes it could make the main product offering uncompetitive3. The discussion thus highlighted the need for a careful balance between aggressive interest rates and maintaining competitiveness in the market.

Posted 3 years ago

Last reply 3 years ago

Summary updated 2 months ago

Last updated 04/12 15:05