Thanks for the comment @miguelmtz. The above was indeed taken into account in the analysis.
Updated Parameter Recommendations:
Gauntlet and Chaos Labs have collaborated and shared our independent analyses for the listing of cbETH and rETH (recommendations for rETH in a separate post).
Considering the similarities between the analyses and conclusions, we have aligned on a set of recommendations for the initial listing of cbETH on Ethereum V3.
The primary considerations were to allow full utility and usage of the assets by enabling them to be borrowed, starting with relatively conservative LT and Supply/Borrow Caps.
| Symbol | Isolation Mode | Borrowable | Collateral Enabled | LTV | LT | LB | RF | LPF | Debt Ceiling | Supply Cap | Borrow Cap |
|---|---|---|---|---|---|---|---|---|---|---|---|
| cbETH | NO | YES | YES | 67% | 74% | 7.5% | 15% | 0.10 | N/A | 10K | 1200 |
Interest Rate Curve and Reserve Factor
The interest rate curve analyses and recommendations provided by Gauntlet:
cbETH is similar to stETH, which has been listed on Ethereum v2 since last Spring, but since borrowing has always been disabled for stETH, we have no data about how users respond to changes in interest rates. As such, we recommend starting with conservative parameters that can be tweaked later.
Under these parameters, the borrower interest rate increases linearly from 0% at 0% utilization to 7% at 45% utilization, and then linearly to 307% at 100% utilization. This interest rate curve matches that of the more volatile assets on Aave (1INCH, CRV, ENS, LINK, MKR, UNI). From a risk perspective, interest rate curves need to be designed to reduce the chances of utilization reaching 100% which would prevent suppliers from withdrawing cbETH and prevent liquidators from seizing cbETH collateral when performing liquidations. The proposed interest rate curve is thus desirable because it uses a low optimal utilization and has a high maximum interest rate.