Summary
A proposal to:
- Increase weETH’s supply and borrow caps on Aave’s V3 Scroll deployment.
- Increase wstETH’s supply cap on Aave’s V3 Scroll deployment.
Motivation
weETH (Scroll)
weETH has reached 100% supply cap utilization on Scroll, and its borrow cap is at 100% capacity.
Supply Distribution
All top weETH suppliers borrow either WETH or weETH against weETH collateral, putting their positions at little risk of liquidation.
Overall, WETH represents 97.18% of the value borrowed against weETH; virtually all borrows against weETH are ETH-correlated assets.
Borrow Distribution
The top weETH borrowers primarily use WETH as collateral, with some also using wstETH and weETH. The largest borrower represents a significant portion of the total market, indicating a concentration of borrowing activity. The largest open positions have low liquidation risk due to the close correlation between the borrowed weETH and the supplied WETH and wstETH assets.
In aggregate, WETH represents 79.91% of the value backing weETH loans.
Recommendation
Given on-chain liquidity and user behavior, we recommend doubling the supply and borrow caps.
wstETH (Scroll)
wstETH has reached 100% supply cap utilization on Scroll, and its borrow cap is at 59% capacity.
Supply Distribution
Most of the top wstETH suppliers borrow WETH, with one maintaining a deposit-only position. The total supply is fairly distributed across wallets without a single supplier dominating the market. The largest open positions have low liquidation risk, as the supplied and borrowed assets (wstETH and WETH) are closely correlated ETH derivatives.
Overall, WETH represents 98.5% of the value borrowed against wstETH.
Recommendation
Given on-chain liquidity, we recommend increasing the supply cap, noting that we are limited by a community decision to set supply caps at a maximum of 75% of on-chain supply.
Specification
Chain | Asset | Current Supply Cap | Rec. Supply Cap | Current Borrow Cap | Rec. Borrow Cap |
---|---|---|---|---|---|
Scroll | weETH | 4,000 | 8,000 | 400 | 800 |
Scroll | wstETH | 20,500 | 22,000 | 4,200 | - |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
For transparency, we aim to execute the risk steward transaction on August 14th at 12:00 pm (Noon) GMT
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this ARFC.
Copyright
Copyright and related rights waived via CC0