Summary
A proposal to:
- Increase ezETH’s supply on Aave’s V3 Ethereum Lido instance.
- Increase wstETH’s borrow cap on Aave’s V3 Ethereum Lido instance.
ezETH (Ethereum Lido)
ezETH has reached 100% supply cap utilization on Ethereum Lido instance. It took 11 minutes for the new cap to get filled. Given the impressive demand for the asset, we expect the caps proposed in this post to be filled quickly as well.
Supply Distribution
There are currently only 4 ezETH suppliers in the market. All of them use it as collateral to borrow wstETH. The top supplier represents a significant share of the market and is solely responsible for the fill of new caps as it is visible from Chaos Labs Risk Dashboard.
The address, which had a previous position of 946 ezETH collateral deposited an additional 15,000 ezETH collateral post supply cap increase. It now maintains a health score of 1.02, which, given the high correlation between ezETH and wstETH, is sufficiently high to not pose a significant liquidation risk.
wstETH (Ethereum Lido)
Inversely, the wstETH borrow cap on the Ethereum - Lido Instance deployment has reached 80% utilization from the aforementioned liquid e-mode strategy. With just 16.47% market utilization, there exists a very large buffer of liquidity to meet the expected borrowing demand of the underlying asset.
Recommendation
We recommend increasing the ezETH supply cap to 60,000 ezETH, as well as the wstETH borrow cap to 56,000. 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 | 30,000 | 60,000 | - | - |
| Ethereum Lido | wstETH | 650,000 | - | 28,000 | 56,000 |
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