Summary
A proposal to:
- Increase USDe’s supply and borrow caps on Aave’s Ethereum deployment.
- Increase WETH’s supply cap on Aave’s Scroll deployment.
- Increase WETH’s supply cap on Aave’s Base deployment.
Motivation
USDe (Ethereum)
USDe has reached 96% supply cap utilization on Ethereum, and its borrow cap is at 72% capacity.
Supply Distribution
Supply is relatively concentrated, with the top supplier representing 60% of the total. This user is borrowing $8M USDC and $25M USDT against $45.7M USDe. The next largest user is supplying $8.5M USDe and $18.5M WBTC and is borrowing $11M USDe against this, making them the largest USDe borrower.
Overall, USDT represents 66.67% of the value borrowed against USDe.
Borrow Distribution
Borrows are very distributed, with a range of collateral assets backing the USDe debt.
Overall, WBTC represents 46% of the value backing USDe loans, followed by WETH at 18.5%.
Recommendation
Given on-chain liquidity and user behavior, we recommend increasing the supply and borrow caps by roughly 50% each.
WETH (Scroll)
WETH has reached 91% supply cap utilization on Scroll, and its borrow cap is at 63% capacity.
Supply Distribution
Most top WETH suppliers borrow USDC or wstETH, with a few maintaining deposit-only positions. The largest WETH supplier represents a significant portion of the total market, though supply is somewhat distributed across other wallets. The largest open positions have moderate liquidation risk, as they primarily involve borrowing stablecoins against WETH collateral.
Overall, USDC represents 56.29% of the value borrowed against WETH.
Recommendation
Given on-chain liquidity and user activity, we recommend increasing the supply cap.
WETH (Base)
WETH has reached 82% supply cap utilization on Base, and its borrow cap is at 99% capacity.
Supply Distribution
Most of the top WETH suppliers borrow USDC, with a few maintaining deposit-only positions. The largest WETH supplier represents a significant portion of the total market, with supply notably decreasing for subsequent positions. The largest open positions have moderate liquidation risk due to the volatility of WETH as collateral against borrowed USDC.
Overall, USDC represents 88.29% of the value borrowed against WETH.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap while leaving the borrow cap unchanged to prevent further deviations above UOptimal. However, should supply increase, we will propose a borrow cap increase.
Specification
| Chain | Asset | Current Supply Cap | Rec. Supply Cap | Current Borrow Cap | Rec. Borrow Cap |
|---|---|---|---|---|---|
| Ethereum | USDe | 80,000,000 | 120,000,000 | 72,000,000 | 110,000,000 |
| Scroll | WETH | 45,000 | 55,000 | 34,000 | - |
| Base | WETH | 27,000 | 45,000 | 18,000 | - |
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