Summary
A proposal to:
- Increase weETH’s supply and borrow caps on Aave’s V3 Scroll deployment.
- Increase WETH’s supply and borrow caps 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
Most of the top weETH are looping with WETH, putting these positions at low risk of liquidation.
Overall, WETH represents 98.34% of the value borrowed against weETH.
Borrow Distribution
The top weETH borrowers primarily use wstETH and WETH as collateral, with the two largest positions showing a mix of both. The largest borrowers represent a significant portion of the total market, though they have low liquidation risk due to the close correlation between the borrowed weETH and the supplied wstETH and WETH collateral.
In aggregate, wstETH represents 51.87% of the value backing weETH loans.
Recommendation
Given on-chain liquidity and user behavior, we recommend increasing supply and borrow caps.
WETH (Scroll)
WETH has reached 84% supply cap utilization on Scroll, and its borrow cap is at 91% capacity.
Supply Distribution
Most top WETH suppliers borrow USDC, with a few also borrowing wstETH or weETH. The largest WETH supplier represents a significant portion of the total supply, though there’s still notable distribution across other wallets. The majority of large open positions have low liquidation risk due to being supply-only or borrowing stablecoins against WETH collateral, while a small number borrowing wstETH have minimal liquidation risk due to the close correlation between the assets.
Overall, USDC represents 58.76% of the value borrowed against WETH.
Borrow Distribution
Most top WETH borrowers use wstETH as collateral, with some also using weETH. The largest WETH borrowers represent a significant portion of the total market, with the top few positions notably larger than the rest. The largest open positions have low liquidation risk due to the close correlation between WETH and its derivatives wstETH and weETH used as collateral.
In aggregate, wstETH represents 69.99% of the value backing WETH loans.
Recommendation
Given on-chain liquidity and user behavior, we recommend increasing the supply and borrow caps.
Specification
| Chain | Asset | Current Supply Cap | Rec. Supply Cap | Current Borrow Cap | Rec. Borrow Cap |
|---|---|---|---|---|---|
| Scroll | weETH | 8,000 | 16,000 | 800 | 1,600 |
| Scroll | WETH | 55,000 | 65,000 | 34,000 | 50,000 |
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 20 at 12:55-13:00 pm GMT
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this ARFC.
Copyright
Copyright and related rights waived via CC0