This is a TEMP CHECK to gauge community sentiment for transferring weETH into Zircuit staking contract.
Motivation
The motivation for this proposal is to allow weETH leverage farmers to get 1.5X Zircuit points on top of the 2.5X EtherFi and 1X EigenLayer points.
Zircuit staking contract does not have an unstaking period, it can not be frozen and the funds can not be auto-migrated to Zircuit when they launch the main net therefore weETH depositors on Fluid do not face any significant risks.
As we can see from the Pendle vaults, Zircuit weETH has more demand than vanilla weETH and YT (leverage) is more expansive by ~33%:
Thereby it seems rational to increase wstETH borrowing rates to attract more wstETH lenders to enable more liquidity for leverage farmers. Current borrowers will also benefit from the extra points farming in exchange for the increased borrowing rate.
Proposal
Given the information above, the Instadapp team would love to explore community feedback on the following proposal:
Transfer weETH into Zircuit staking contract to obtain a 1.5X boost on Zircuit points
Increase wstETH borrowing rate
Current wstETH Rate Curve
Utilization 0%: 0% Rate
Utilization 70%: 20% Rate
Utilization 90%: 40% Rate
Utilization 100%: 150% Rate
Proposed wstETH Rate Curve
The new wstETH rate curve adjustments are as follows:
Utilization 0%: 0% Rate
Utilization 70%: 23% Rate
Utilization 90%: 43% Rate
Utilization 100%: 150% Rate
This will bring the interest rate to 38% vs the current 35% at 85% utilization.
I strongly disagree with increasing the rate curve. At this point it is clear that interest rate plays no role in attracting more wstETH depositors. Fluid has by far the best rate for wstETH so it is clear, that it is not about interest rate but probably more about general safety of the protocol.
As for depositing into Zircuit sure go ahead at least the loopers get more yield to cover this insane cost. In the end the loopers are who make this possible and bear the majority of risk, so let us not be greedy and milk them even more. Also adjusting the rate curve every other week seems unprofessional, why did you not come up with this sooner?
What other projects are you comparing yourself to? My approach is holistic, there is wstETH on the market and your job is to attract it. You increased the rate curve, interest went up 50% and barely any new wstETH has come from outside of you. So do you really think 3% increase gonna do anything?
As for professionalism, do you think it is sign of good project if it adjusts rate curve every other week? Are you going to decrease it if the points will be worthless? You should be really thinking about people who made this high interest rate possible, it is us loopers who bear most of the risk.
The only difference the rate curve increase is going to make is make people angry and they might leave. If people leave your rate curve increase will backfire and earn less fees for the protocol and lot of people will see it us: I am never gonna do any strategy there, because you have to keep checking on them if they adjust the parametres. So is the 3% worth it? Just get us more worthless points and leave the rate curve as it is.
Thank you for the Fluid team for continuing in innovate and improve this vault! I support the adjustment to the interest rate curve and deposit of the weETH collateral into Zircuit.
Adding Zircuit points makes better capital efficiency, how to integrate it in a way that makes sense for both the protocol and the borrowers should be our main concern not whether we add Zircuit or not.
Hello the team has submitted an on-chain proposal to transfer weETH into Zircuit contracts. Big thanks for everyone who added to the conversation and dialogue here and on Discord. The submitted proposal does not change the rate curves only moves weETH for additional yield.
