title: ARC - Update Risk Parameters Mainnet Arc Market
status: Proposed
author: @MatthewGraham, @ncitron, 3SE Holdings and UHOM
Created: 22/03/2022
Simple Summary
This ARC proposes updating the mainnet Arc market Loan to Value (LTV) and Liquidation Threshold to be the same asset listed on mainnet V2 market, as determined by Gauntlet.
Abstract
The risk parameters on the mainnet Arc market are currently not being maintained and are more conservative than those belonging to the same asset on mainnet V2 market. This proposal recommends updating the mainnet Arc market LTV parameter to match the LiquidationThreshold of the same asset listed on mainnet V2 market.
We intend to re-propose a quarterly update of the risk parameters for the mainnet Arc market quarterly in an attempt to keep both markets in sync with mainnet V2 market, or mainnet V3 once live.
Motivation
This risk parameter change is targeting the following improvements on the Aave Arc Market:
- Align Risk Parameters - The risk parameters on Aave Arc market are currently more conservative and are in need of being updated to better reflect the mainnet V2 market and also the risk profile of the user.
- Improve UX - Increasing LTV ratios and reducing the Liquidity Penalty enables greater capital efficiency across the market.
Given the extra precaution shown when approving Borrowers on the Aave Arc Market, the recommendation is to amend the LTV to reflect the risk profiles of market participants. For now, the intent is to maintain the mainnet Arc market in line with the mainent V2 market on a quarterly basis.
Specification
The below table shows the assets listed on the mainnet Arc market and their respective risk parameters on the mainnet Arc market.
| Asset | Maximum LTV | Liquidation Threshold | Liquidation Penalty | Reserve Factor | Used as Collateral | Stable Borrowing |
|---|---|---|---|---|---|---|
| USDC | 80% | 85% | 5.00% | 10% | Yes | Yes |
| ETH | 80% | 82.5% | 5.00% | 10% | Yes | Yes |
| wBTC | 70% | 75% | 10.00% | 20% | Yes | Yes |
| AAVE | 50% | 65% | 10.00% | 0% | Yes | No |
The below table shows the assets listed on the mainnet Arc market and their respective risk parameters on the Aave V2 market. This is for comparison purposes only.
| Asset | Maximum LTV | Liquidation Threshold | Liquidation Penalty | Reserve Factor | Used as Collateral | Stable Borrowing |
|---|---|---|---|---|---|---|
| USDC | 85.5% | 86% | 4.5% | 10% | Yes | Yes |
| ETH | 82.5% | 85% | 5% | 10% | Yes | Yes |
| wBTC | 70% | 75% | 6.5% | 20% | Yes | Yes |
| AAVE | 60% | 70% | 8% | 0% | Yes | No |
The below table shows the assets listed on the mainnet Arc market and the proposed risk parameters.
| Asset | Maximum LTV | Liquidation Threshold | Liquidation Penalty | Reserve Factor | Used as Collateral | Stable Borrowing |
|---|---|---|---|---|---|---|
| USDC | 85.5% | 86% | 4.5% | 10% | Yes | Yes |
| ETH | 82.5% | 85% | 5% | 10% | Yes | Yes |
| wBTC | 70% | 75% | 6.5% | 20% | Yes | Yes |
| AAVE | 60% | 70% | 8% | 0% | Yes | No |
# Voting
FOR:
DO Update the risk parameters on mainnet Arc market as per mainet V2 market
AGAINST:
DO NOT change the existing arrangement.
Copyright
Copyright and related rights waived via CC0.