[ARFC] Chaos Labs Risk Stewards - Increase Supply and Borrow Cap on V3 Gnosis - 03.22.2024

Summary

A proposal to increase

  • WXDAI — Supply and Borrow Cap
  • sDAI — Supply Cap

Motivation

The recommendations below were made utilizing Chaos’ supply and borrow cap methodologies after analyzing user positions for each asset.

WXDAI

The supply and borrow caps for WXDAI on Gnosis V3 are currently at 81% and 73% utilization, respectively.

The growth in WXDAI has again been driven by a single user who supplied 3M WXDAI on March 20, a day after the supply caps were doubled. This user has still not borrowed against their position and maintains a balance of 5.3M xDAI deposited in the sDAI contract, along with balances of 700K WXDAI and 210K xDAI.

Borrow Distribution

Less than $100K worth of assets is borrowed against WXDAI.

Considering the current liquidity and user positions on Gnosis, we recommend increasing the supply and borrow cap to 18M.

sDAI

The supply cap for sDAI on Gnosis V3 is currently at 100% utilization.

Borrow Distribution:

As seen below, 80% of borrowed assets against sDAI collateral are stablecoins. This is a decline from 98% earlier this week, when the supply cap was doubled from 10M to 20M. However, the composition of borrows remaining stablecoin-heavy makes large scale liquidations less likely.

Today, a user deposited 5.94M sDAI and borrowed 700 wETH ($2.45M). The health score of their positions on Gnosis is 2.14. Considering the liquidity on Gnosis and the composition of borrows, we recommend increasing the supply cap to 40M.

Specification

Chain Asset Current Supply Cap Recommended Supply Cap Current Borrow Cap Recommended Borrow Cap
Gnosis WXDAI 9,200,000 18,000,000 9,200,000 18,000,000
Gnosis sDAI 20,000,000 40,000,000 N/A N/A

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

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As the latest Risk Steward update for these assets was done on 3.19.2024, we will create and execute the tx to implement these changes on Sunday, 3.24.2024, following the 5-day lock-up period.

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The transaction for this proposal has now been executed.

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