[MRC-33] axlUSDC Market Parameter Adjustment


This proposal aims to lower the slope_1 parameter (related to the interest rate model) of the axlUSDC market in the Red Bank. We expect this adjustment to make the market more efficient and lead to more axlUSDC borrow demand.


The axlUSDC market has remained relatively underutilized. Currently, the utilization rate is at ~45%, while the optimal utilization for the market is set at 80%. We assume this behavior is, at least in part, due to the current interest rate parameters, which could be making borrowing too expensive and driving away borrowing demand. As such, we expect lowering the slope_1 parameter to increase borrowing demand for this market.


We propose to lower the slope_1 parameter from 0.2 to 0.125. The rationale for the new slope_1 is as follows:

  • We want the slope_1, which indicates what the borrow interest rate is at optimal utilization, to lead to a deposit interest rate close to what we expect to be the equilibrium interest rate (or fair interest rate) for axlUSDC on Osmosis.
  • Establishing what this fair interest rate should be is more art than science, but currently our thinking is as follows. We start by considering what the base interest rate (lowest risk interest rate) for USDC is. At the moment, we think the closest to that is what users could receive for depositing their stablecoins into blue chip money markets on Ethereum. This rate is currently between 3-4% (on Aave v3 it’s 3%, while Maker just announced intentions to offer a 3.5% interest rate to DAI depositors). Taking this into account, we’re assuming a 4% base interest rate to be conservative.
  • Now, we need to establish a premium on top of that given that axlUSDC on Osmosis on the Red Bank is expected to be considered riskier than native USDC on Ethereum on a battle tested money market. We’re currently setting this premium at 2x what the base interest rate is, so 8%.
  • Given the optimal utilization (80%) and the protocol fee (20%), for us to achieve an 8% interest rate at optimal utilization, the slope_1 should be 12.5%.

At the current utilization (~45%) this change would lead to an interest rate reduction for borrowers from ~11% to ~7%. At ~11% borrow interest rate, the new slope_1 would lead to ~70% market utilization. All in all, we expect this adjustment to lead to an increase in utilization and efficiency for the axlUSDC market.


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 change.


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This proposal is being made by Delphi Labs Ltd., a British Virgin Islands limited company. Delphi Labs engages in incubation, investment, research and development relevant to multiple ecosystems and protocols, including the Mars Protocol. Delphi Labs and certain of its service providers and equity holders own MARS tokens and have financial interests related to this proposal. Additionally, Delphi Labs is one of several entities associated with one another under the “Delphi Digital” brand. Delphi Digital’s associated entities and/or equityholders or service providers of such entities may hold MARS and may have financial interests related to this proposal. All such entities, service providers, equity holders and other related persons may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including Osmosis/OSMO. 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. Delphi Labs may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Delphi Labs is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Delphi Labs 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.