Warden Finance - Base Liquidity Incentives

Rebalancing of Base Liquidity Incentives (2024-01-27)

Key observations

  • Moonwell markets utilization
    • rETH and cbETH markets are underutilized (15% utilization vs 45% kink). Demand for borrowing on such markets has historically been not very elastic to rates.
    • All markets other markets are at optimal utilization level (slightly below kink)
  • Moonwell markets total supply vs on-chain circulating supply
    • DAI and rETH have low circulating supply on Base relative to the current total supply on Moonwell Base deployment. (total supply > 50% circulating supply) Low on-chain liquidity increases the risk of accumulating bad debt when users hold very concentrated positions.
    • wstETH and Native USDC circulating supply have steadily increased over the last month. Increased on-chain liquidity reduces the risk of accumulating bad debt for the protocol, allowing for more growth to be sustained on lending markets.
    • USDbC on-chain circulating supply (75M) has been on a strong downtrend as users have started to migrate more aggressively towards Native USDC (210M).


The set of changes we have rolled out on Jan 27 aim to address the following concerns:

  • Address low on-chain circulating supply for DAI and rETH
  • Sustain growth for ETH and wstETH

Applied changes

Reward distribution (% of allocation) cbETH DAI USDbC USDC ETH wstETH rETH
WELL supply 20% 18%→10% 0% 20% 36%→40% 4%→8% 2%
WELL borrow 0% 0% 0% 0% 0% 0% 0%
USDC supply 20% 18%→10% 0% 20% 36%→40% 4%→8% 2%
USDC borrow 0% 0% 0% 0% 0% 0% 0%