A smart contract that dynamically adjust the ultilization kink of a lending protocol based on historical data
How does it work?
Lending protocols such as Compound use the utilization rate to determine interest rates. The utilization rate includes a fixed kink factor, above which interest rates increase more rapidly. With Axiom, the kink can be dynamically determined.
For example, we can design a kick adjustment contract for Compound V3 that is maintained by a keeper network. The contract calls Axiom contracts to retrieve the historical utilization rate (emitted as event when the lending contract is called). Additional logic can be applied to this data in the Axiom REPL circuit. The logic can be as simple as, if the rolling 30d utilization rate of cUSDC is greater than 80%, then reduce the kick by 1%. The kick will increase once the rolling rate goes back to 80%. The result will be returned to the adjustment contract in a callback function that either leads to no change or an update to the kick.
Why use Axiom?
Finetuning the kick factor is one of the most important tasks of a lending protocol. This process is currently managed in a rather opaque manner because consulting firms such as Gauntlet are reluctant to pulicize their finetuning algorithms. Additionally, the lengthy governance process to update the kick adds unnecessary latency and could harm the protocol in extreme conditions. Axiom solves these problems by creating a trustless, flexible, and private framework for protocol finetuning. Consultants can opt to keep their logic private and offchain with Axiom, and the adjustment happens in real time when it is triggered.
What is it?
A smart contract that dynamically adjust the ultilization kink of a lending protocol based on historical data
How does it work?
Lending protocols such as Compound use the utilization rate to determine interest rates. The utilization rate includes a fixed kink factor, above which interest rates increase more rapidly. With Axiom, the kink can be dynamically determined.
For example, we can design a kick adjustment contract for Compound V3 that is maintained by a keeper network. The contract calls Axiom contracts to retrieve the historical utilization rate (emitted as event when the lending contract is called). Additional logic can be applied to this data in the Axiom REPL circuit. The logic can be as simple as, if the rolling 30d utilization rate of cUSDC is greater than 80%, then reduce the kick by 1%. The kick will increase once the rolling rate goes back to 80%. The result will be returned to the adjustment contract in a callback function that either leads to no change or an update to the kick.
Why use Axiom?
Finetuning the kick factor is one of the most important tasks of a lending protocol. This process is currently managed in a rather opaque manner because consulting firms such as Gauntlet are reluctant to pulicize their finetuning algorithms. Additionally, the lengthy governance process to update the kick adds unnecessary latency and could harm the protocol in extreme conditions. Axiom solves these problems by creating a trustless, flexible, and private framework for protocol finetuning. Consultants can opt to keep their logic private and offchain with Axiom, and the adjustment happens in real time when it is triggered.
Resources
https://docs.compound.finance/governance/#set-borrow-kink