---
# System prepended metadata

title: '[Gauntlet] – Response to Frontier Markets Update'
tags: [FM]

---

# [Gauntlet] – Response to Frontier Markets Update

## Summary  
- **We note and agree**: Objective Labs removed supply caps and shifted FM risk to users.  
- **We understand and agree:** Risk is clearly stated in the frontend, empowering users to DYOR.  
- **Actionable recommendation:** Increase the USDC kink rate in the Frontier **mMEV** vault from **8% → 8.25%** to reflect the higher risk profile **relative to other vaults**.

---

## 1. Concurrence with Objective Labs’ Adjustments

1. **Adaptive IRM adopted**  
   Objective Labs’ decision to anchor FM kink rates at 8% for USDC (and 2% for ecosystem assets) aligns with our recommendation and reflects a market-driven design instinct.

2. **Supply caps removed**  
   By dropping the 50% supply-cap rule, Objective Labs clearly signals that FMs are **permissionless**, shifting ongoing risk responsibility onto participants.

---

## 2. Emphasizing Front-End Risk Disclosure

> “Frontier Markets shift risk responsibility entirely to participants. This must be **prominently displayed** on the dApp.”

Objective Labs has made it clear that FMs are **not actively risk-managed**; they are:  
- **Template-based**, requiring minimal due diligence to deploy.  
- **Hands-off**, with emergency governance only in extreme events (e.g., sustained depegs, oracle failures).

We support UI callouts such as:  
> 🔍 **“These vaults carry higher risk. Please DYOR before supplying collateral.”**

---

## 3. IRM Sensitivity

- **IRM as a lever:** With the DYOR framing and user-led risk assumption, the utility and adoption of Frontier Market vaults will be sensitive to the underlying interest rate model (IRM).The long-term success and profitability of these markets will depend heavily on selecting an IRM that appropriately embeds a risk premium reflective of their unmanaged, higher-risk nature. 

---

## 4. Recommendation: Frontier mMEV USDC Rate Adjustment

While we concur with the broad IRM structure, we propose a **25 bps premium** for USDC vault in **Frontier mMEV**:

| Vault                 | Current Kink Rate | Proposed Kink Rate |
| --------------------- | ----------------- | ------------------ |
| Frontier mMEV – USDC  | 8.00%             | **8.25%**          |


- **Rationale:**  
  - **Frontier mMEV vault:** Utilizes delta-neutral MEV and arbitrage strategies, introducing execution complexity.  
  - **Risk premium needed:** This vault carries materially greater risk than Frontier Level and Frontier Renzo markets, so the IRM should include an appropriate premium to ensure Liquidity Providers are fairly compensated.  

---

## Conclusion

By raising the USDC kink rate in Frontier mMEV to **8.25%**, Objective Labs can better align growth incentives with risk compensation—while keeping the **DYOR** message front and center in the UI.
