Optimistic Rewards Rates Adjustments

Morpho Blue Rewards
1

Now that the DAO has approved an optimistic rewards rate adjustment framework, the Morpho Association will post planned rewards rate changes in this thread at least 24 hours prior to the implementation of the change, as specified in the framework.

The first optimistic adjustment proposed is as follows:

  • implement the following rates reductions on Ethereum:
    • stablecoins — 10% reduction
      • rationale: rates remain competitive, slowing the pace of reduction compared to previous proposals now that rates have been reduced from their previous high
    • ETH — no reduction
      • the protocol has seen meaningful outflows in ETH, so no change is proposed at this time while data is gathered
    • Other assets — 20% reduction
      • rationale : most other lending assets are low productivity and should continue to move gradually toward reward deprecation
  • implement the following rates reductions on Base:
    • global 20% reduction
      • rationale: rates on Base are higher high than on Ethereum (For stablecoins, ~1.92% rewards APR on Base vs ~1.21% on Ethereum). Growth in borrow demand is robust, and Morpho recently became the largest lending protocol on Base by total value borrowed.
    • BTC and other assets besides ETH and stablecoins — additional 10% reduction on top of global 20%
      • rationale — low productivity assets, moving toward rewards deprecation

Additionally, it’s proposed to adjust the sLIM values on Ethereum and Base to 2.5B and 400M respectively, with a proportional decrease in r0 such that rates are held constant. This is a technical change with no immediate impact on rates, but will allow the current rate to remain stable as deposits scale (since when supply is above the sLIM value, any new deposits dilute the rewards rate).

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The second optimistic adjustment is proposed as follows:

  • 20% reduction in rates for BTC assets (and “other” assets which share the Bitcoin multiplier) on Base

Rationale: rates on Base are relatively higher than on Ethereum currently, but higher rates on stablecoins are desirable given the strong demand growth from the Coinbase borrow integration. Therefore, the DAO can conserve resources by reducing rates for less productive lending assets.

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