Circle's Chief Economist Proposes Adjusting the USDC Interest Rate Curve on Aave

BlockBeats News, April 23rd, Circle's Chief Economist and Head of Research, Gordon Liao, proposed a new plan at the Aave Governance Forum.

Gordon Liao stated that USDC on Aave v3 Ethereum Core has been near 100% full utilization for several days. The variable borrowing rate has remained flat near the post-kink ceiling (around 14%), while the pool's supply has shrunk by about $60 million in the past 24 hours as repayments queued withdrawals matched in full. The rate failed to efficiently clear the market, leading him to believe that parameter recalibration is necessary. The specific proposals are as follows:

· Slope 2: Increase from the current approximately 10% to a 50% target value, temporarily adjusted to 40% by the Risk Steward in the meantime.

· Optimal Utilization Rate (U)*: Lower from 92% to an 85% target value, temporarily adjusted to 87% by the Risk Steward in the meantime.

· Slope 1: Maintain at 3.5%. Base Rate: Maintain at 0%. Reserve Factor: Maintain at 10%.

· Slope 2 Risk Oracle: Suspend during this event or set a bottom for USDC until market conditions normalize before reactivation.

The goal of this adjustment is clear: to restore the post-kink region as an effective price discovery range, allowing the pool to achieve liquidation through a price mechanism rather than a withdrawal queue. It also aims to bring the pool's effective timespan back from 'unknown' to near instant (when utilization is below 100%). The latter is crucial for attracting capital 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 temporary parameter adjustments as Risk Stewards, and then formal voting confirmation through the full governance process within a week. LlamaRisk holds the data, possesses 2/2 Risk Steward multisig authority, and according to their continuity statement, they will explicitly override Slope 1, Slope 2, Base Rate, and U*.