Gauntlet provides the below recommendation for Aave V2:
Enabling KNC as collateral - despite KNCL having previously been supported as collateral - involves a degree of market risk. In general, per Gauntlet’s Asset Listing Framework, we recommend listing assets without enabling them as collateral in order to
- First, observe how usage evolves for supplies and borrows for the asset
- Derisk any mechanism design issues that could pose an outsized risk to Aave
It is valuable to compare KNC and KNCL’s historical liquidity profile. On Coingecko, regarding market cap, KNC has a market cap of $120mm, and KNCL averaged a market cap of $200mm in the spring of 2022. Regarding average volumes, KNC has average daily volumes of roughly $40mm, while KNCL averaged $200mm in the spring of 2022.
As such, should the community wish to enable KNC as collateral, we recommend the below initial parameters for KNC. These parameters are more conservative than the original KNCL parameters. Once we observe more inflow/borrow/supply and ensure that there are no outstanding issues, we may look to adjust these parameters depending on the results of our simulation analysis and economic stress tests.
LTV: 40%
Liquidation threshold: 50%
Liquidation bonus: 10%
Reserve factor: 20%