[ARFC] Chaos Labs Risk Parameter Updates - WBTC.e on V2 and V3 Avalanche


A proposal to adjust risk parameters for WBTC.e on Avalanche deployments, to limit further exposure and promote user migration to BTC.b:

  • V2
    • Freeze asset
    • Reduce Liquidation Threshold and LTV
  • V3
    • Freeze asset
    • Reduce Liquidation Threshold and LTV


As the Avalanche network is transitioning away from WBTC.e, we are observing an ongoing decrease in WBTC.e liquidity on-chain, with approximately 30% of the liquidity diminishing over the past few months. At this time, the total circulating supply on Avalanche is 1,731 WBTC.e. A considerable portion, nearly 67%, of the circulating supply is concentrated on Aave Avalanche V2 and V3, with ~496 and ~664 tokens, respectively.

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Time series of total WBTC.e circulating supply on Avalanche

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Time series of WBTC.e-USDC price impact on Avalanche, showing a trend of decreasing DEX liquidity

Given the persistence of this trend, we suggest reducing exposure on Aave and proactively modifying risk parameters for the asset. This strategy aims to:

  1. Avert a potential scenario where there is inadequate liquidity to facilitate liquidations in Aave deployments.
  2. Motivate new and existing users on Aave to transition to BTC.b, which has a stronger liquidity profile on Avalanche.

Limit New Supply

Freeze the WBTC.e reserves on V2 and V3 Avalanche.

Reduce Capital Efficiency

Additionally, as a precautionary measure and to further reduce exposure to the asset, we recommend reducing LTs and LTV, without impacting current holders:

  • V3 - reduce LT to 70 % and LTV to 0.
  • V2 - reduce LT to 70% and LTV to 0.
    • at this time, this will lead to 6 accounts totaling $15 to be liquidated.

Usage Analysis

Currently, about 31% of the WBTC.e supply serves as collateral, primarily utilized for borrowing stablecoins, WETH, and WAVAX. A detailed breakdown of borrowing distribution is highlighted below.

In addition, in both Avalanche deployments, we haven’t detected any risky positions, nor is there a significant concentration of funds in individual wallets.


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V3 Avalanche

Asset Parameter Current Recommendations
WBTC.e Liquidation Threshold 75% 70%
WBTC.e LTV 70% 0%
WBTC.e Freeze Reserve NO YES

V2 Avalanche

Asset Parameter Current Recommendations
WBTC.e Liquidation Threshold 75% 70%
WBTC.e LTV 60% 0%
WBTC.e Freeze Reserve NO YES

Next Steps

  1. Following community feedback, submit the ARFC for a snapshot vote for final approval.
  2. If consensus is reached, submit an Aave Improvement Proposal (AIP) to implement the proposed updates.


Chaos Labs has not been compensated by any third party for publishing this ARFC.


Copyright and related rights waived via CC0


Reducing caps to 0 will factually remove the caps, not put the cap to 0 units

1 Like

We have updated the proposal with a recommendation to freeze the WBTC.e reserve rather than setting the supply and borrow caps to 0.

We have published a Snapshot for the community to vote on, starting in 24h.

We thank you in advance for your participation in the vote.

AIP-2 has been published for this proposal, with voting starting in less than 24h.

Thank you in advance for your participation in the vote.


Hello - I’ve been out of crypto for a while and had some WBTC.e left which is captured on snapshot. Is there a guide on how to unwrap and convert to to wrapped eth btc?

Thank you,

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