Summary
A proposal to:
- Increase CRV’s supply and borrow caps on Aave’s V3 Ethereum main instance.
- Increase cbBTC’s borrow cap on Aave’s V3 Base main instance.
- Increase weETH’s supply cap on Aave’s V3 Base main instance.
CRV (Ethereum)
CRV has reached 81% supply cap utilization and 99% borrow cap utilization.
Supply Distribution
CRV’s supply distribution does not present risks, as the three largest positions are either deposit-only or maintain strong health scores.
Only $175K of the asset’s $1M debt ceiling is currently being utilized; this also ensures that the only assets borrowed against CRV are stablecoins.
Borrow Distribution
Borrowing is also distributed and against a variety of collateral assets, with WBTC being the most popular amongst large borrowers.
Overall, wstETH is also a popular collateral asset against CRV. Given the liquidity of these assets, these positions do not present a risk to Aave.
Recommendation
Given user behavior and on-chain liquidity, we recommend doubling the borrow cap while increasing the supply cap by 50%, given that supply has not grown significantly in recent months. This increase is backed by Chaos Labs’ risk simulations, which consider the user’s behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
cbBTC (Base)
cbBTC has reached 96% borrow cap utilization.
Borrow Distribution
Borrows are highly concentrated with a single user, who is borrowing cbBTC and wstETH against cbBTC collateral, with a strong health score (given the correlation) of 1.73.
This user does not present a risk to the protocol given their low risk of liquidation.
Recommendation
Given low-risk user behavior and on-chain liquidity, we recommend doubling the borrow cap. This increase is again backed by Chaos Labs’ risk simulations.
weETH (Base)
weETH has reached 92% supply cap utilization on Base and its borrow cap is at 8% capacity.
Supply Distribution
All but two of the of the top weETH suppliers uses it as collateral to borrow WETH; the two exceptions use the asset to loop with itself. The top position represents a 25.8% of the supply, which indicates high supply concentration. However, due to the correlation between the collateral and borrow assets, none of these positions poses a significant liquidation risk.
Overall, E-Mode assets represent 98.2% of the value borrowed against weETH.
Recommendation
Given the high correlation between the borrow and supply assets, but the limited on-chain supply of weETH, we recommend increasing the supply cap to 40,000 weETH. This increase is backed by Chaos Labs’ risk simulations, which consider the user’s behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
Specification
| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum | CRV | 11,500,000 | 17,250,000 | 3,500,000 | 7,000,000 |
| Base | cbBTC | 5,000 | - | 80 | 160 |
| Base | weETH | 32,000 | 40,000 | 9,000 | - |
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