[ARFC] - Chaos Labs Risk Stewards - Increase Supply and Borrow Caps on V3 - 08.29.2023

[ChaosLabs]

Summary

A proposal to increase:

• Supply and Borrow cap for RPL on Aave V3 Ethereum.
• Supply and Borrow cap for wstETH on Aave V3 Ethereum.
• Borrow Cap for wstETH on Aave V3 Arbitum.
• Supply cap for LUSD on Aave V3 Arbitum.
• Supply cap for LINK on Aave V3 Arbitrum
• Borrow Cap for cbETH on Aave V3 Base.

Motivation

The recommendations below were made utilizing Chaos’ supply and borrow cap methodologies and after analyzing user positions for each asset.

RPL (Ethereum)

The supply and borrow cap for RPL on V3 Ethereum are currently at 100% and 74% utilization, respectively.

As RPL is listed as a non-collateral asset, we recommend doubling the current supply cap to 420K RPL. Given the current borrow cap utilization, we recommend increasing the cap to 160K.

wstETH (Ethereum)

The supply and borrow cap for wstETH on Ethereum are currently at 91% and 96% utilization, respectively.

We recommend increasing the supply cap to 750K and doubling the borrow cap to 24K.

LUSD (Arbitrum)

The supply cap for LUSD on Ethereum is currently at 96% utilization.

The total circulating supply of LUSD on Arbitrum is currently 2.3M. As LUSD is not utilized as collateral, we currently recommend capping the supply at 60% of the total on chain circulating supply. As We recommend doubling the cap from 900K to 1.4M

wstETH (Arbitrum)

The borrow cap for wstETH on Arbitrum is currently at 91% utilization.

We recommend doubling the cap from 800 to 1,600 wstETH

cbETH (Base)

The borrow cap for cbETH on Base is currently at 91% utilization.

We recommend doubling the cap from 100 to 200 cbETH

Specification

Chain	Asset	Current Supply Cap	Recommended Supply Cap	Current Borrow Cap	Recommended Borrow Cap
Ethereum	RPL	210,000	420,000	105,000	160,000
Ethereum	wstETH	600,000	750,000	12,000	24,000
Arbitrum	LUSD	900,000	1,400,000	900,000	No Change
Arbitrum	LINK	810,000	1,300,000	242,250	No Change
Arbitrum	wstETH	45,000	No Change	800	1,600
Base	cbETH	1,000	No Change	100	200

Next Steps

Once we receive feedback from @Gauntlet on the above recommendations, we will be able to move forward to implement these updates via the Risk Steward process.

[Marceau]

Given the current borrow cap utilization, we do not recommend increasing it at this time.

RPL is currently only a few percentage points away from it’s optimal lending rate (74% vs. 80%). As such, shouldn’t we also consider increasing it’s borrow cap as well?

[ChaosLabs]

Hi @Marceau,
We make our recommendations for borrow caps based on the demand for borrowing. As the total borrows at the time of the post represented 67% of the cap, we did not recommend increasing it. Given the increase in borrows and to allow for an additional buffer we have updated the post to increase the borrow cap to 160K.

Please note that the current utilization is at 37.3%, not 74%, as suggested in your comment. The mixup could be between the “borrow cap utilization” and the “utilization rate.”

[ChaosLabs]

We have updated the original post to incorporate a recommendation to increase the supply cap of LINK on Arbitrum, as discussed on [ARFC] Aave V3 Caps increase - 2023.08.31, a proposal initiated by @Alice

[Gauntlet]

Gauntlet is aligned with these cap changes; however, we recommend a larger increase to the supply cap for wstETH on Ethereum Aave v3 to 900K.

[ChaosLabs]

Given the current supply, we stay firm with our recommendation to increase the wstETH supply cap to 750,000 as this will allow sufficient buffer for growth of nearly 200K wstETH.

We’ve prepared the payload to be executed via the Risk Steward process for this proposal.

• Ethereum
• Arbitrum
• Base

[Gauntlet]

This has been executed via risk steward.