Chaos Labs supports the proposal to onboard MAI to V3 Arbitrum with the following parameters:
| Risk Parameter | Value |
|---|---|
| Isolation Mode | YES |
| Enable Borrow | YES |
| Enable Collateral | YES (in isolation mode) |
| Loan To Value | 75% |
| Liquidation Threshold | 80% |
| Liquidation Bonus | 7.5% |
| Reserve Factor | 20% |
| Liquidation Protocol Fee | 10% |
| Borrow Cap | 1,000k |
| Supply Cap | 1,200k |
| Debt Ceiling | 2,000k |
| Base | 0% |
| Slope1 | 4% |
| Uoptimal | 80% |
| Slope2 | 75% |
Overview
Chaos Labs supports listing MAI in Isolation Mode as part of an overarching strategy to increase the offering of AAVE protocol with more volatile assets. As a low market cap asset, MAI is susceptible to price manipulation, so listing it with an appropriate debt ceiling is crucial to prevent a profitable pump attack.
Liquidity and Market Cap
When analyzing market cap and trading volumes of assets for listing, we look at data from the past 180 days. The average market cap of MAI over the past 180 days was $46.6M, and the average daily trading volume was $3.8M (CeFi & DeFi). We find the market cap adequate and the trading volumes reasonable as long as they are considered when setting appropriate supply caps, a debt ceiling, and borrow caps.
Liquidation Threshold
Analyzing MAI price volatility over the past, we observed daily annualized volatility of 5.66% and 30-day annualized volatility of 2.51%. Considering this volatility and the history of MAI on other networks, we support the suggested LT of 80%.
We support listing MAI as borrowable under reasonable limits of supply cap, as we do not observe a significant risk to the protocol by allowing to borrow MAI, as long as it is bound by a well-defined cap.
Debt Ceiling
Following Chaos Labs’ Isolation Mode Methodology, we support the initial debt ceiling of $2M.
Supply Cap, Borrow Cap, and Liquidation Bonus
Following Chaos Labs’ approach to initial supply caps, as introduced with the Metis deployment recommendations, we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact.
Given the concentrated liquidity of MAI we recommend a 7.5% Liquidation Bonus and a derived supply cap of 1.2M MAI, and a borrow cap of 1M MAI.
We are aware that the initial supply cap is lower than the proposed debt ceiling, as the initial supply cap is conservative to allow future increases after analyzing initial user behavior.
