Summary
A proposal to:
- Increase ezETH’s supply caps on Aave’s Ethereum-Lido Instance deployment.
- Increase wstETH’s borrow caps on Aave’s Ethereum-Lido Instance deployment.
ezETH (Ethereum Lido)
ezETH reached 100% supply cap utilization on the Ethereum - Lido Instance deployment in the first three minutes of market initialization by 4 whales, as can be seen in the event logs below.
Supply Distribution
Through the deployed liquid e-mode strategy for ezETH collateralized wstETH debt, the leading ezETH suppliers actively use ezETH as collateral to borrow wstETH. The largest ezETH supplier holds a substantial share of the total market with 6.26K supplied, while the remaining top wallets display a fairly balanced distribution in their supply contributions. The largest open positions carry minimal liquidation risk, as both the supplied and borrowed assets are ETH-correlated. These assets leverage fundamental oracles to prevent deviations in underlying market prices subject to the configured parameters, and the respective positions maintain relatively high health factors, further reinforcing stability.
Address 0xd6813390a28c8e3bc0dc838a346bd48f98b6da6f
Address 0xd46b96d15fff9b2b17e9c788086f3159bd0e8355
Address 0x7abe065d55b7a092f8d1c1a67e174707d6f2ac07
Address 0x4aa29d0aec8c80cad432cc2e272ab2351b72b745
wstETH (Ethereum Lido)
Borrow Distribution
Inversely, the wstETH borrow cap on the Ethereum - Lido Instance deployment has reached 73% utilization from the aforementioned liquid e-mode strategy. With just 7.5% market utilization, there exists a very large buffer of liquidity to meet expected borrowing demand of the underlying asset.
Recommendation
We recommend increasing the ezETH supply cap to 30,000 ezETH, as well as the wstETH borrow cap to 28,000. 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 Lido | ezETH | 15,000 | 30,000 | - | - |
Ethereum Lido | wstETH | 650,000 | - | 14,000 | 28,000 |
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