Simulation Of Interest Rate Data

Brief

Since Advias is not launched on mainnet yet, we wanted to simulate the protocols functionalities under real world conditions. The goal of this is to see if:
  • Will Advias beat the best yield income on a yearly basis
  • If so, by how much

Abstract

In this study, we test the rebalancing algorithm with the default stable interest rate algorithm built by the Advias Protocol team. Specifically, we are introducing Advias into a simulation of real world data of 5 highly liquid protocols based on TVL through June 2021 to June 2022 on a weekly basis. We demonstrate how the algorithm and unique interest rate formula is able to achieve a yield higher than all competitors in the model by almost 100%, or 2 times.

Intro

The criteria for the data points chosen were focused on fair distribution. The goal is to have the results hold true for the long term horizon. Therefor we chose USDC, and asset that has the highest liquidity across all chains, chose the most liquid and popular protocols, and chose protocols from multiple chains where one chain cannot repeat >1 delta to the competing protocol chains.

The following parameters were given:

  • Even distribution of protocols from multiple chains where one chain cannot be present ∆>1p over the next chain sharing protocols
  • Lending sector based protocols
  • Ascending top 15 in TVL protocols
  • Protocols from chains where the chain is one of the top five TVL chains in ascending order.

Advias Logic:

The rebalancing algorithm is taken into account alongside simulating Advias to have the average borrow rate on the simulation time frame (weekly).
The Model:
Each line color represents a real protocols average deposit interest rates per week for 48 weeks. The dotted grey line represents the average spread between the highest yielding and lowest yielding protocol.
While the rebalancing algorithm is ran per transaction, the model is based on a weekly interval. This shows a conservative result.
This next graph shows the results with Advias' included in the simulation, show in bold black.

Conclusion:

Over the year, the highest appreciating position achieved a 5.7% APR, whereas Advias achieved an 11.7% APR, surpassing 2x the income.
While these conditions are under perfect conditions by code, it demonstrates the power of a global-economy.
Of the base data in the simulation, the protocol with the lowest TVL was approximately 350M. Assuming Advias had 350M in TVL as well, it would have yielded 40.95M vs 19.95M

Data:

On A Weekly Basis:

The spread is the nominal interest rate difference between the highest supply rate and the lowest supply rate on a weekly average.
  • Average spread: μ∆ = 7.740208333333335%
  • Max spread: max{...) = 17.3%
  • Min spread: min{...) = 2.29%

Base Model:

Best Yearly Yield: 5.7%

Advias Included:

Advias Yield: 11.7%
A highly robust version of this will be coming with block by block data over the last 1-2 years. It will feature much more including simulated borrowing positions to display our Goldilocks Positions to show what is really possible. Not only are users able to get the best supply rates, but also probabilistic chain average borrowing rates to induce a delta positive position alpha to competitors.