Nolus #375 10/16/2026, 2:18:09 PM

Raise the lender yield on the WETH short market

Nolus proposal #375: Current situation: the WETH pool that funds ETH short positions holds about 10.2 WETH and is almost fully utilised (99.6% of deposits ar...

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Original Proposal Text

Current situation: the WETH pool that funds ETH short positions holds about 10.2 WETH and is almost fully utilised (99.6% of deposits are lent out). Its interest curve was set conservatively at launch: 0.5% base rate plus a 0.6% utilisation add-on, which caps the borrow rate at 2.5% once utilisation passes 70%. At today's utilisation lenders earn about 2.4% APR on their WETH. That is barely above ETH staking (about 2.3% on Lido) and gives no reason to move ETH into the pool, so the pool stays small and new ETH shorts regularly hit the 'no liquidity' wall. Proposal: raise the curve to a 2% base rate plus a 1.2% utilisation add-on, keeping the 70% optimal utilisation. The borrow rate then tops out at 6% instead of 2.5%. Lenders would earn about 4.2% at 70% utilisation and close to 6% at today's level, roughly double ETH staking and about four times the WETH supply rate on Aave (1.3%). Borrowers opening ETH shorts pay 6% plus the 1% protocol margin at the plateau, in line with Fluid and Morpho ETH markets. Effect: applies to the WETH pool only. Existing ETH short positions reprice to the new curve on their next interest period. No contract code changes; only the pool's rate parameters are updated.

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