Summary
This proposal aims to update the USDC interest rate model on both the Neutron and Osmosis deployments of the Mars Red Bank. The goal is to align borrowing costs with market benchmarks and improve capital efficiency — particularly at moderate utilization levels (40–50%), where current rates are significantly above competitors.
- Neutron: This will be an executable proposal handled by the Mars Risk DAO if passed.
- Osmosis: This will be a signaling proposal, to be executed by the builders multisig if passed.
Motivation
A comparative analysis of interest rate curves across protocols such as Aave, Euler, Kamino, Morpho, and Suilend shows that Mars’ USDC borrow rates are currently 3–5% higher at 40–50% utilization. This is likely contributing to below-optimal utilization levels on Mars.
- Current utilization: ~40–50%
- Optimal utilization: 85%
- Mars borrowing rate at 40–50%: ~9–10%
- Competitor borrowing rate at same levels: ~5–7%
Reducing the slope_1 parameter will help bring Mars rates in line with the market, attract more borrowers, and improve protocol efficiency.
Proposed Parameter Update
| Parameter | Current | Proposed |
|---|---|---|
| Base Rate | 3% | 3% |
| Slope 1 | 12% | 6% |
| Slope 2 | 120% | 120% |
| Optimal Utilization | 85% | 85% |
Benefits
- More competitive borrowing costs at mid-range utilization
- Increased utilization, driving protocol revenue and efficiency
- Improved user experience for borrowers, without sacrificing lender returns at high utilization
Risks
- Lower slope_1 may reduce returns for suppliers at moderate utilization.
- However, higher utilization is expected to offset this by improving protocol throughput.
This is a parameter-only update. It introduces no smart contract changes or technical risks.
Implementation
This is a signaling proposal, not an executable proposal. The Mars smart contracts on the Osmosis chain are currently controlled by the Builder Multisig address. If this proposal passes, the builders will utilize their multisig to make the necessary parameter changes.
- On Neutron, execution will occur via the Mars Risk DAO.
- On Osmosis, this proposal is a signal. If passed, the Mars Builder Multisig will execute the changes.
Conclusion
Lowering slope_1 from 12% → 6% brings Mars Protocol’s USDC market in line with major lending protocols, supports higher utilization, and enhances capital efficiency. We recommend the community support this update across both Neutron and Osmosis deployments.
Copyright
Copyright and related rights waived via CC0.
Disclaimers/Disclosures
This proposal is being made by Mars Protocol Foundation, a Cayman Islands foundation company. Mars Protocol Foundation engages in research and development of the Mars Protocol. Mars Protocol Foundation and certain of its service providers and managers own MARS tokens and have financial interests related to this proposal. The aforementioned persons or their affiliates may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including OSMO and NTRN. These statements are intended to disclose relevant facts and to help identify potential conflicts of interest, and should not be misconstrued as a complete description of all relevant interests or conflicts of interests; nor should they be construed as a recommendation to purchase or acquire any token or security.
This proposal is also subject to and qualified by the Mars Disclaimers/Disclosures. Mars Protocol Foundation may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Mars Protocol Foundation is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Mars Protocol Foundation shall have no liability in the event of losses or damages ensuing from approval or rejection or other handling of the proposal. Each user and voter should undertake their own research and make their own independent interpretation and analysis of all relevant facts and issues to arrive at their own personal determinations of how to vote on the proposal.