Summary
A proposal to:
- Increase WETH’s supply cap on Aave’s Scroll V3 deployment.
- Increase wstETH’s supply cap on Aave’s Scroll V3 deployment.
- Increase weETH’s supply and borrow caps on Aave’s Scroll V3 deployment.
- Increase BAL’s supply and borrow caps on Aave’s Ethereum V3 deployment.
Motivation
WETH (Scroll)
WETH has reached 85% supply cap utilization on Scroll, and its borrow cap is at 81% capacity.
Supply Distribution
The top WETH suppliers show a mix of strategies, with some borrowing USDC or wstETH. The largest WETH supplier represents a significant portion of the total supply, indicating a somewhat concentrated market. For the largest open positions that involve borrowing, the liquidation risk is generally low due to the use of stablecoins or closely correlated assets like wstETH against WETH collateral.
Recommendation
Given user behavior, we recommend increasing the supply cap; there is no need to increase the borrow cap at this time.
wstETH (Scroll)
wstETH has reached 100% supply cap utilization on Scroll-main, and its borrow cap is at 70% capacity.
Supply Distribution
Most of the top wstETH suppliers borrow WETH, with a few maintaining deposit-only positions. The largest open positions have low liquidation risk, as the supplied wstETH and borrowed WETH are closely correlated ETH derivatives.
Overall, WETH represents 96.45% of the value borrowed against wstETH.
Recommendation
Given on-chain liquidity and user distribution, we recommend increasing the supply cap.
weETH (Scroll)
weETH has reached 100% supply cap utilization on Scroll-main, and its borrow cap is at 99% capacity.
Supply Distribution
Most of the top weETH suppliers maintain a combination of supply and borrow positions, primarily borrowing WETH against their weETH collateral. As mentioned above, the largest open positions have low liquidation risk.
Overall, WETH represents 95.82% of the value borrowed against weETH.
Borrow Distribution
The top weETH borrowers primarily use WETH as collateral, with some also using weETH and wstETH. The largest borrower represents a significant portion of the total market, suggesting 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 or other ETH derivatives.
In aggregate, WETH represents 46.69% of the value backing weETH loans.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply and borrow caps.
BAL (Ethereum)
BAL has reached 100% supply cap utilization on Ethereum-main, and its borrow cap is at 85% capacity.
Supply Distribution
Most of the top BAL suppliers maintain deposit-only positions, with a few borrowing small amounts of USDT or USDC. The total supply is fairly distributed across three wallets, with no single supplier dominating the market.
Borrow Distribution
BAL borrowers use a variety of collateral assets; the largest open positions have moderate liquidation risk due to the volatility of BAL compared to the collateral assets used.
In aggregate, WETH represents 41.24% of the value backing BAL loans.
Recommendation
Given on-chain liquidity and user behavior, we recommend increasing the supply and borrow caps.
Specification
| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Scroll | WETH | 70,000 | 80,000 | 63,000 | - |
| Scroll | wstETH | 22,000 | 30,000 | 12,000 | - |
| Scroll | weETH | 30,000 | 35,000 | 3,200 | 6,400 |
| Ethereum | BAL | 5,700,000 | 10,000,000 | 500,000 | 1,000,000 |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
For transparency, we will execute the transactions at 11:30 am UTC
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this ARFC.
Copyright
Copyright and related rights waived via CC0
