Aave service provider TokenLogic has proposed a broad update to stablecoin interest-rate curves across the lending protocol, combining higher borrowing targets on 22 reserves with a separate adjustment for Ethena-linked stablecoins and temporary liquidity measures on key markets. The changes are framed as a way to keep borrowing conditions competitive while pricing stablecoin debt more consistently with market demand and available yield alternatives.
Under the proposal, most of the in-scope reserves would see Slope1 increased by 50 basis points, while Base USDC would get a smaller 25 basis point rise. TokenLogic also wants to raise the borrowing cost of USDe toward the level of Ethena staking yields and temporarily lift optimal utilization on selected Ethereum Core and Plasma USDC and USDT markets to absorb any debt that migrates out of USDe.
Why TokenLogic wants rates higher
TokenLogic said the proposal is based on sustained utilization and supply-demand conditions rather than short-term market moves. In its view, some Aave stablecoin markets have shown enough persistent borrow demand to support a higher target rate, while slower or flatter deposit growth justifies offering a better return to suppliers.
The provider estimates that, at current borrow balances and utilization, the general Slope1 changes would add about $2.55 million in annual DAO revenue if demand does not change. GHO is excluded because it is managed separately, and frozen reserves are not part of the plan.
Base USDC is treated differently from the rest. Instead of a 50 basis point move, TokenLogic proposes only a 25 basis point increase, taking Slope1 from 4.50% to 4.75%. It argued that the market already sits above comparable Aave deployments, even if it remains cheaper than alternatives on Base.
USDe repricing and temporary capacity relief
A separate part of the proposal targets Ethena yield-bearing stablecoins. TokenLogic said the borrowing cost for USDe should be aligned more closely with its native staking rate, which it models at roughly 5.3%. The goal is to reprice that debt closer to external yield conditions rather than leave it unusually cheap inside Aave.
Because a higher USDe base rate could push borrowers into other stablecoin pools, the proposal also recommends a temporary 2% increase in optimal utilization for Ethereum Core and Plasma USDC and USDT reserves. At current deposit levels, TokenLogic estimates that this would unlock around $116 million in additional borrowing capacity.
The stated purpose of the temporary utilization change is to prevent abrupt borrow-rate spikes while the receiving markets absorb incoming demand. TokenLogic said the higher ceiling should later be reduced back to current levels once the Slope1 increases have had time to attract more supply.
Projected impact on Ethereum stablecoin markets
TokenLogic modeled how Ethereum Core stablecoin reserves might react under a set of assumptions, including weekly USDC deposit growth of $14 million, later USDT deposit growth of $18 million once reserves reach optimal utilization, and migration behavior shaped by borrowers’ tolerance for small rate differences. It also assumed that debt leaving USDe would be redistributed to other Aave markets where there is available liquidity.
Under that framework, the firm expects the first adjustment step to carry most of the impact. It projects roughly $366 million of deposits moving from Spark Savings into the Ethereum Core USDT market, allowing the reserve to absorb demand released by the USDe repricing without a lasting rate spike. At the same time, about $10.1 million of syrupUSDT-backed looped positions are expected to unwind because the new borrowing cost would reduce their appeal.
Across the full sequence, TokenLogic expects the combined Ethereum Core USDT and USDC book to end about $408 million larger than today, with roughly $356 million on USDT and $52 million on USDC after switching between the two markets. It projects realized borrow rates settling near 4.27% for USDT and 4.47% for USDC, while total outflows from migrations and closures would be around $55 million.
Staged rollout through Risk Stewards
Rather than applying the full increase at once, TokenLogic recommends implementing Slope1 changes in 10 basis point steps through the Risk Stewards process, with all covered reserves moving together. It said this phased approach reduces the risk of overshooting the rate that borrowers are willing to accept and makes any misstep easier to reverse.
Borrow balances would be the main signal between steps. If debt continues to hold or grow, TokenLogic said that would support further increases. If borrowing falls beyond normal volatility and the drop is not mirrored in comparable untouched markets, the provider said it would halt additional increases on that reserve. It also said the schedule could be paused if neither deposit growth nor debt reduction appears after a move, or if utilization falls below a reserve-specific floor.
The target cadence is weekly 10 basis point changes, though TokenLogic said execution could accelerate to as fast as every 72 hours if markets react positively. The USDe base-rate changes, along with the Slope2 and optimal-utilization updates, are also expected to be handled through Risk Stewards, with the complete initial execution stretching over roughly two weeks.
What happens next
The proposal says detailed specifications for subsequent changes will be posted in follow-up responses after the first parameter adjustments. TokenLogic also said more analysis is coming for stablecoin reserves that were not covered here, particularly smaller markets and books where conditions may support rate cuts instead of increases.
For now, the confirmed next steps are to expand the specification work for the full Slope2 and UOptimal package and then begin the gradual Slope1 and Base-rate changes under Risk Stewards monitoring. Once the full 50 basis point Slope1 increase, or 25 basis points for Base USDC, has been reached, TokenLogic said market conditions will be reassessed to determine whether another proposal is needed.
Source: governance.aave.com