Overview
Chaos Labs provides a recommendation to lower supply and/or borrow caps for underutilized assets. We are prepared to return them to their original values were the markets in question to demonstrate a growth in demand.
Motivation
As part of our regular monitoring of Aave, we have observed multiple markets with consistently low utilization. While these markets do not present immediate risks, it is prudent to lower caps to better match demand.
The chart below displays the identified markets, all of which have not exceeded 25% supply cap utilization since the beginning of February and have displayed declining or static usage.
For assets that have shown very low activity, such as ENS, we recommend setting the supply cap closer to 2x the current supply; lower caps are less likely to prevent deposits in highly static markets.
In cases where markets are implicitly or explicitly being deprecated, such as on the EtherFi instance, we recommend decreasing caps to 1. In the case of FRAX on Avalanche, we recommend setting the cap to 50% of on-chain supply.
In the case of assets that Aave is transitioning away from, such as USDC.e on Polygon, we also recommend setting the supply cap to 2x the current supply, as future deposits are better directed towards the native USDC market.
For USDT on ZkSync, because it is a relatively new deployment, we recommend a relatively higher supply cap to allow for potential growth.
For 1INCH and CAKE, we recommend setting the supply caps to 6x the current supply to allow for growth.
For all other assets, we’ve recommended supply caps that are roughly 3x the current supply, providing sufficient space for new deposits while ensuring controlled growth. In cases where the borrow cap must also be decreased, we have set the recommended borrow caps guided by the UOptimal in each market.
Additionally, we have observed low and decreasing supply cap utilization for all stablecoins on Metis. Thus, we recommend reducing their caps, setting them to 3x the current utilization.
Specification
| Instance | Asset | Curr. Supply Cap | Rec. Supply Cap | Curr. Borrow Cap | Rec. Borrow Cap |
|---|---|---|---|---|---|
| Avalanche | FRAX | 1,500,000 | 300,000 | 1,000,000 | 270,000 |
| BNB | Cake | 5,000,000 | 2,400,000 | 2,250,000 | 1,200,000 |
| Ethereum Core | 1INCH | 30,000,000 | 9,000,000 | 475,200 | - |
| Ethereum Core | cbETH | 60,000 | 18,000 | 2,400 | - |
| Ethereum Core | ENS | 1,500,000 | 600,000 | 40,000 | - |
| Ethereum Core | FRAX | 15,000,000 | 2,500,000 | 12,000,000 | 2,000,000 |
| Ethereum Core | LUSD | 18,000,000 | 7,000,000 | 8,000,000 | 5,000,000 |
| Ethereum Core | sDAI | 340,000,000 | 5,000,000 | - | - |
| Ethereum EtherFi | FRAX | 15,000,000 | 1 | 12,000,000 | 1 |
| Ethereum EtherFi | PYUSD | 60,000,000 | 1 | 54,000,000 | 1 |
| Ethereum EtherFi | USDC | 140,000,000 | 1 | 135,000,000 | 1 |
| Ethereum EtherFi | weETH | 50,000 | 1 | - | - |
| Optimism | AAVE | 45,000 | 18,000 | - | - |
| Optimism | LUSD | 2,000,000 | 500,000 | 500,000 | 400,000 |
| Polygon | DAI | 45,000,000 | 18,000,000 | 30,000,000 | 16,000,000 |
| Polygon | USDC.e | 48,000,000 | 16,000,000 | 43,500,000 | 14,000,000 |
| Scroll | wstETH | 10,000 | 6,000 | 1,300 | - |
| ZkSync | USDT | 6,000,000 | 3,000,000 | 2,700,000 | - |
| Metis | m.USDC | 14,500,000 | 10,000,000 | 13,000,000 | 9,000,000 |
| Metis | m.USDT | 12,000,000 | 4,500,000 | 11,000,000 | 4,000,000 |
| Metis | m.DAI | 1,240,000 | 1,000,000 | 1,110,000 | 900,000 |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this ARFC.
Copyright
Copyright and related rights waived via CC0