TechFlow News: On April 23, according to the Aave Governance Forum, Gordon Liao of Circle published an ARFC proposal recommending a two-step adjustment to the USDC interest rate model parameters on Aave v3 Ethereum Core to address the current liquidity shortage in the pool.
Current Context: Affected by the rsETH incident on April 18, the USDC pool utilization has remained near 100%, with available liquidity falling below $3 million. The borrowing rate has been persistently capped at the 14% upper limit, and the pool’s total supply has contracted by approximately $60 million over the past 24 hours—rendering market clearing via price mechanisms impossible.
Key elements of the proposal:
Step One (to be executed immediately by Risk Administrators): Increase Slope 2 from 10% to 40%, reduce the optimal utilization rate from 92% to 87%, and temporarily suspend the Slope 2 risk oracle for USDC.
Step Two (to be completed within 5–7 days via governance vote): Further increase Slope 2 to 50% and reduce the optimal utilization rate to 85%.
The proposal argues that a large number of borrowers are currently insensitive to interest rates and primarily borrow to bypass withdrawal queues and exit positions. Active leverage is essential to attract new suppliers into the market. Raising the maximum supply rate to the 40%–50% range is expected to draw USDC inflows within hours, driving utilization back below the kink point and restoring normal market clearing functionality. Additionally, the proposal recommends suspending the Slope 2 risk oracle developed by Chaos Labs, citing its historically sluggish response during stress events and the fact that Chaos Labs officially exited the Aave ecosystem on April 6, introducing uncertainty regarding future maintenance.
