Circle's Chief Economist Proposes Adjusting the USDC Interest Rate Curve on Aave

**Circle’s Gordon Liao Proposes Aave v3 USDC Parameter Tweaks Amid Near-100% Utilization** On April 23, Circle Chief Economist and Head of Research Gordon Liao unveiled a set of proposed adjustments for USDC on Aave v3 Ethereum Core during the Aave Governance Forum. The push comes as the pool’s USDC has remained near 100% utilization for days, with its variable borrowing rate stuck flat near the post-kink ceiling (~14%)—a sign the rate failed to efficiently clear the market. Over the past 24 hours, the pool’s supply shrank by roughly $60 million as repayments fully matched withdrawal queues, prompting Liao to call for parameter recalibration. Key proposals include: - **Slope 2**: Target 50% (up from ~10% current); Risk Stewards to temporarily set it to 40% - **Optimal Utilization Rate (U\*)**: Target 85% (down from 92%); temporary adjustment to 87% - **Slope 1, Base Rate, Reserve Factor**: Remain unchanged at 3.5%, 0%, and 10% respectively - **Slope 2 Risk Oracle**: Suspend temporarily or set a floor for USDC until market conditions normalize The goals are to restore the post-kink region as an effective price discovery range (enabling liquidation via pricing instead of withdrawal queues) and return the pool to near-instant access (when utilization is below 100%)—critical for attracting capital back to the on-chain market. For execution, Liao suggested LlamaRisk and Aave Labs (as Risk Stewards) first implement temporary changes. LlamaRisk holds 2/2 multisig authority to override the targeted parameters, with a formal governance vote planned within a week to confirm the adjustments.