Circle Economist Proposes Raising USDC Borrowing Rate on Aave to Address Liquidity Pressure

BroadChain, April 23, 21:16 - Circle Chief Economist Gordon Liao recently submitted a proposal on the Aave governance forum, recommending adjustments to the USDC interest rate parameters for the Aave v3 Ethereum core market. This move aims to alleviate the high utilization and liquidity strain that has persisted for several days following the KelpDAO rsETH incident.

The core content of the proposal includes initially raising the "Slope 2" parameter to 40%, with a target of 50%, while simultaneously lowering the optimal utilization rate. Gordon Liao believes these adjustments will attract more USDC deposits, thereby improving market liquidity.

However, some Aave community members have expressed concerns about this. They point out that higher borrowing costs could increase the liquidation risk for borrowers. Data shows that Aave's current total value locked is approximately $15.3 billion.