Summary
Following an analysis of market data, we provide recommendations to optimize interest rates on Seamless. This is especially important given ongoing changes to MakerDAO’s DAI Savings Rate — specifically the July 16 decrease of the DAI Savings Rate from 8% to 7%.
USDC
The amount of USDC supplied and borrowed on Seamless has increased significantly over the last three months.
This is largely driven by the top accounts, which are looping USDC with itself, likely to accrue ongoing SEAM token rewards.
As a result, we recommend increasing the relatively low Reserve Factor of 5% to one in line with other protocols: 15%.
Additionally, we find that, as a result of this relatively stable behavior, rates have been static since June, with a recent decrease coinciding with both a drop in supply and borrow in the market as well as MakerDAO’s Savings Rate update.
Given the change to MakerDAO’s DSR, we recommend decreasing Slope1 to 6.5% and Slope2 to 75%. All of these changes are intended to boost organic activity in the market; the Slope2 reduction will ensure that, should utilization jump above UOptimal, borrowers are not too severely punished.
DAI
The amount of DAI supplied and borrowed on Seamless has fluctuated over the last three months, rising to a high of about 500k DAI before return to a baseline of 200k.
Much like USDC, this is largely driven by the top accounts, which are looping DAI with itself to accrue ongoing SEAM token rewards.
We recommend increasing DAI’s low Reserve Factor of 10% to one in line with other protocols: 20%.
Rates have remained largely static in this market, with one wick upwards due to overutilization in early July. Otherwise, utilization rates have largely hovered around UOptimal.
Given the change to MakerDAO’s DSR and the relative stability of DAI’s supply and borrow rates, we recommend decreasing Slope1 to 6.5%.
USDbC
The amount of USDbC supplied and borrowed on Seamless has decreased significantly over the last three months as the migration from bridged to native USDC has continued.
This is also largely driven by the top accounts, which are largely maintaining deposit-only positions.
Given the ongoing migration and current liquidity conditions, we recommend increasing USDbC’s Reserve Factor to favor USDC.
Rates have been more volatile for USDbC than the other two markets, punctuated by brief periods of overutilization.
Given this occasional overutilization even prior to the DSR update, we recommend holding Slope1 constant. We recommend increasing the Reserve Factor to favor native USDC.
AERO
The amount of AERO supplied and borrowed on Seamless has grown significantly since listing.
AERO’s supply is dominated by the top five accounts, all of which are deposit only.
On the borrow side, many users are borrowing AERO against WETH and USDC, suggesting possible short interest or usage of AERO in LPing.
Given that the reserve factor for this market is already 20%, we recommend no change to that parameter. However, given that AERO has experienced significant overutilization and therefore interest rate volatility more than 50% of the time over the past two months, we suggest increasing AERO’s slope1 to 20%.
Specifications
| Asset | Reserve Factor | Slope1 | Slope2 |
|---|---|---|---|
| USDC | 5% → 15% | 7% → 6.5% | 300% → 75% |
| DAI | 10% → 20% | 7% → 6.5% | - |
| USDbC | 15% → 25% | - | - |
| AERO | - | 9% → 20% | - |