Circle's Chief Economist proposes adjusting the USDC interest rate curve on Aave

BlockBeats message, April 23 — Circle’s Chief Economist and Research Director Gordon Liao released a new proposal at the Aave Governance Forum.

Gordon Liao said that USDC on Aave v3 Ethereum Core has been in a state of being near 100% fully utilized for several consecutive days. The variable borrowing rate has remained flat around the post-kink ceiling (approximately 14%) and throughout the period the pool’s supply has contracted by about $60 million over the past 24 hours, because queued withdrawals being waited out are fully matched by repayments. The rate has failed to effectively clear the market, and he believes it is necessary to recalibrate the parameters. The specific recommendations are as follows:

· Slope 2: Increase from the current approximately 10% to a 50% target value, during which Risk Steward first temporarily adjusts it to 40%.

· Optimal Utilization (U)*: Decrease from 92% to an 85% target value, during which Risk Steward first temporarily adjusts it to 87%.

· Slope 1: Keep at 3.5%. Base rate: Keep at 0%. Reserve factor: Keep at 10%.

· Slope 2 Risk Oracle: Pause during this event or set a lower limit for USDC, and re-enable it after market conditions normalize.

The goal of this adjustment is very clear: to restore the post-kink region as an effective price discovery range, so that the pool can achieve liquidation through the price mechanism rather than through the withdrawal queue. At the same time, it can also pull the pool’s effective liquidation window back from “unknown” to near-instantaneous (when utilization is below 100%). The latter is important for attracting capital to flow back in and restoring a healthy on-chain market.

In the actual execution path, Gordon Liao suggests that LlamaRisk and Aave Labs first carry out the temporary parameter adjustments in the capacity of Risk Stewards, and then within one week confirm them through a formal vote via the full governance process. LlamaRisk holds the data and has 2/2 Risk Steward multi-signature authorization, and according to its continuity statement, they will clearly manually override Slope 1, Slope 2, the base rate, and U*.