Gauntlet Analysis
Our original recommendation here excludes YFI from the initial launch of Aave V3 ETH as a result of market metrics and usage.
However, if the community has a strong strategic preference towards listing YFI, below are Gauntlet’s parameter recommendations.
| Syntax | Description |
|---|---|
| Liquidation Bonus | 8.5% |
| Borrow Cap | 500 |
| Supply Cap | 500 |
| Debt Ceiling | 6,700k |
Given that YFI will be in isolation mode and have a debt ceiling, our analysis shows that a liquidation bonus decrease from the proposed parameters would still properly incentivize liquidators. The liquidation bonus decrease from the original recs will keep the effective liquidation incentive closer to the Aave V2 value. Based on our borrow and supply cap methodology, the borrow cap (assuming the initial post was a typo) and supply cap should both be 500. For the initial parameterization, a more conservative setting of 6.7M, which can be calculated from the supply cap, liquidation threshold, and current price, would be prudent. We can revisit this as the market matures.