Summary
A proposal to:
- Increase cbBTC’s borrow cap on the Base instance.
- Increase osETH’s supply cap on the Ethereum Core instance.
- Increase USDC’s supply and borrow caps on the ZkSync instance.
- Increase USDC.e’s supply cap on the Gnosis instance.
All increases are backed by Chaos Labs’ risk simulations, which consider user behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
cbBTC (Base)
cbBTC’s supply cap is 24% utilized while its borrow cap is fully utilized.
Borrow Distribution
Borrows are concentrated in a single position, with a user borrowing cbBTC against WETH.
While this position is large, WETH is highly liquid, and cbBTC’s liquidity is sufficient to facilitate an increase in the borrow cap.
Liquidity
cbBTC’s liquidity against WETH has steadily improved since September.
Recommendation
Given user behavior and on-chain liquidity, we recommend doubling the borrow cap.
osETH (Ethereum Core)
osETH’s supply cap is 48% utilized while its borrow cap was recently reduced to 1.
Supply Distribution
Unlike other LST/LRTs, osETH’s top two suppliers are not borrowing WETH against their position, putting this market at somewhat higher risk of liquidation. However, these accounts carry strong health scores of 4.39 and 5.01, respectively, decreasing the likelihood of liquidation.
However, overall WETH is still the most borrowed asset against osETH.
Liquidity
osETHs’ liquidity has remained stable against USDC, allowing us to recommend a supply cap increase.
Recommendation
Given on-chain liquidity, we recommend doubling osETH’s supply cap.
USDC (ZkSync)
USDC has nearly reached its supply cap while its borrow cap is 59% utilized. Growth has been driven by ZK Ignite incentives for supplying USDC.
Supply Distribution
Supply is well distributed, with no single user accounting for a majority of the market. Additionally, none of the top supply positions present liquidation risk in their current form.
Users are primarily looping the asset with itself, reducing the risks in this market.
Borrow Distribution
As a result, there is significant overlap between top suppliers and top borrowers. The top borrowing positions do not present a risk to the protocol.
USDC is the largest collateral asset for USDC, followed by WETH, which is highly liquid.
Liquidity
Liquidity for the asset has improved significantly since the start of the ZK Ignite program.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing USDC’s supply and borrow caps.
USDC.e (Gnosis)
USDC.e has reached its supply cap while its borrow cap is 66% utilized.
Supply Distribution
Supply is concentrated with a single user, though this user does not borrow against their collateral, significantly reducing the risk in this market.
Overall, USDC.e is scarcely used as a collateral asset on Gnosis.
Recommendation
Given user behavior, we recommend increasing the supply and borrow caps.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Base | cbBTC | 5,000 | - | 320 | 640 |
| Ethereum Core | osETH | 10,000 | 20,000 | 1 | - |
| ZkSync | USDC | 16,000,000 | 32,000,000 | 14,400,000 | 28,800,000 |
| Gnosis | USDC.e | 6,000,000 | 10,000,000 | 5,400,000 | 9,000,000 |
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