# \[ARFC\] Chaos Labs Risk Stewards - Increase cbBTC Supply and Borrow Caps on Aave V3 **URL:** \ **Category:** Governance\ **Created:** [October 5, 2024, 6:10pm UTC](https://governance.aave.com/t/arfc-chaos-labs-risk-stewards-increase-cbbtc-supply-and-borrow-caps-on-aave-v3/19316 "2024-10-05T18:10:52Z")\ **Posts on this page:** 3\ **Page:** 1
**Author:** ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)\ **Post date:** [October 5, 2024, 6:10pm UTC](https://governance.aave.com/t/arfc-chaos-labs-risk-stewards-increase-cbbtc-supply-and-borrow-caps-on-aave-v3/19316/1 "2024-10-05T18:10:52Z")
# **Summary** A proposal to: - Increase cbBTC’s supply and borrow cap on Aave’s V3 Ethereum deployment. - Increase cbBTC’s supply and borrow cap on Aave’s V3 Base deployment. # Motivation Given the recent demand shown for cbBTC, Chaos Labs recommends increasing caps. ## cbBTC (Ethereum) cbBTC has reached 100% supply cap utilization on Ethereum, and its borrow cap is at 41% capacity. The previous cap increase was filled within one day as demands exceeded expectations. ![image - 2024-10-05T210059.456](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/ee9307660debe4c0b5c3596084d4c5717566bcf7.png) ![image - 2024-10-05T210102.469](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/4c417a9cc817b096eb38e81c98425137068e6610.png) ### Supply Distribution Most of the top cbBTC suppliers use their holdings to borrow stablecoins like USDT, GHO, and USDC. The supply is highly concentrated in the largest supplier, which maintains a supply-only position. The remaining positions show mixed health scores, with the third-largest supplier currently at 1.05. The riskiest position uses cbBTC as collateral to borrow USDC, and due to its significant size, it presents a moderate liquidation risk. ![image - 2024-10-05T210105.663](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/42b07598a9abd9dcbbb7d96e8edc0146c9d39a5f.png) ### Liquidity The DEX liquidity of the asset recently dropped by roughly 25% but remains deep and sufficient to withstand the most likely liquidations. The current buy-side liquidity for cbBTC is $30M. ![image - 2024-10-05T210108.676](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/9d1de8799ba427df2528e3cf07c4f8c273f52171.png) ### On-chain properties cbBTC showed a quickly growing on-chain supply and cumulative transaction value. We expect these values to increase significantly in the coming weeks as more supply is onboarded to cbBTC. ![image - 2024-10-05T210111.570](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/a/a3024d0f96c1fdacbb91223fc664441ee46305b6.png) While Aave successfully attracted over 30% of the on-chain supply, the restricting supply caps caused over 500 cbBTC to be deposited in competing lending markets. ![image - 2024-10-05T210115.149](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/4d863f61e02fc801c3d249fe29cabbba4734e48b.png) ### Recommendation Given user behavior and liquidity, we recommend increasing the supply and borrow caps. ## cbBTC (Base) cbBTC has reached 100% supply cap utilization on Base, and its borrow cap is at 17% capacity. The previous cap increase was filled within one day as demand was overwhelming. ![image - 2024-10-05T210118.237](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/d/de5189589a9e741325b9616a92a4a5f13acfe383.png) ![image - 2024-10-05T210120.795](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/f/f256f91b13201d31fafc04ea5e7db26063161636.png) ### Supply Distribution While most of the top cbBTC suppliers borrow USDC, the largest wallet holds a supply-only position, accounting for over 70% of the total market supply. Although the remaining positions are small, they maintain very safe health scores, posing no significant risk of liquidation. ![image - 2024-10-05T210124.849](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/3/3a1895e913c3dbb7ec0f6fba163e1c4ce2337bd0.png) ### Liquidity The Base DEX liquidity shows a similar situation to the Ethereum DEX liquidity, with a recent drop in liquidity following the asset price drop. The most recent value for the DEX liquidity of cbETH is $23M. ![image - 2024-10-05T210128.526](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e0368164096a0eb6116d4a551c46f53a03c4b5c3.png) ### On-chain properties The growth and utilization of cbBTC on Base is faster than on Ethereum. ![image - 2024-10-05T210131.740](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/5/59504fc504df0ff8c9dd6e0ca35bfce9501c334e.png) While the on-chain distribution on the Base chain represents a notable improvement over Ethereum, and Aave has captured over 40% of the on-chain supply, the current caps have still led to 300 cbBTC being deposited into competing lending platforms. ![Screenshot 2024-10-05 at 16.01.38](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/a/afb26359cf57c7eeefd48f5d1a84da9c6b342d07.png) ### Recommendation Given user behavior and on-chain liquidity, we recommend increasing supply and borrow caps. # **Specification** | Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap | | --- | --- | --- | --- | --- | --- | | Ethereum | cbBTC | 1,200 | 2,400 | 45 | 90 | | Base | cbBTC | 800 | 1,600 | 20 | 40 | ---
**Author:** ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)\ **Post date:** [October 5, 2024, 6:19pm UTC](https://governance.aave.com/t/arfc-chaos-labs-risk-stewards-increase-cbbtc-supply-and-borrow-caps-on-aave-v3/19316/2 "2024-10-05T18:19:22Z")
The transactions have been executed: - [Ethereum](https://etherscan.io/tx/0xdaac496001358a267e44ba73b602c24ae61de623c15551f262e30cd9aa509ff9) - [Base](https://basescan.org/tx/0xc8c20ee44046c518446ad3f803f9fea427d50091e31570145adf19b91bf463c1) ---
**Author:** ![system](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e11637c36f45ffa158f2146f5c19438d46e0824d.svg) [@system](https://governance.aave.com/u/system)\ **Post date:** [November 4, 2024, 6:19pm UTC](https://governance.aave.com/t/arfc-chaos-labs-risk-stewards-increase-cbbtc-supply-and-borrow-caps-on-aave-v3/19316/3 "2024-11-04T18:19:31Z")
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