Gauntlet Risk Analysis
Thanks, @jbeezy, for this proposal.
Gauntlet has provided a detailed risk analysis on the Shanghai upgrade below, which is incorporated in this set of recommendations for LDO.
LDO token has a unique profile of being heavily affected by the Shanghai upgrade. Gauntlet has provided analysis on the Shanghai upgrade before here. In particular, we have observed how LDO returns relative to ETH since the start of the year have been buoyed by positive sentiment heading into the Shanghai upgrade. Potential unforeseen mishaps with the stETH redemption process, while unlikely, could thus negatively affect public perception for LDO token, triggering a sell-off and compromising the quality of LDO as collateral.
The community can assess these idiosyncratic risks to decide when / whether to list LDO. Below are the parameters Gauntlet recommends if the community wishes to list LDO.
Recommendation
Supply cap - 6M. We recommend our conservative caps out of an abundance of caution, given the unquantifiable risk presented above.
Borrow cap - 6M. We also recommend our conservative caps here.
Debt Ceiling - $7.5M. Initializing the debt ceiling with 50% of the dollar value of the supply cap will help protect against tail events while providing sufficient room to explore LDO usage.
Isolation Mode - yes
Borrowable - yes
LT - 57%. LDO has a 160% annualized volatility, so 57% accounts for this higher volatility while giving room to explore the usage of LDO collateral.
LTV - 52%
LB - 10900 (9%). Gauntlet recommends 9% LB to properly incentivize liquidations due to the higher volatility of LDO
RF - 20%
LPF - 10%
Rates
Base - 0%
Slope 1 - 7%
Slope 2 - 300%
Stable - 13%
Uopt = 45%