Summary
A proposal to:
- increase the WETH supply and borrow caps.
- increase the USDC supply and borrow caps.
WETH
Motivation
WETH’s supply and borrow caps stand at 96% and 69% utilization, respectively.
Supply Distribution
Most of the top suppliers are borrowing USDC against WETH collateral. These positions are at risk of liquidation should ETH’s price drop sufficiently.
USDC is by far the most commonly borrowed asset against WETH collateral, standing at over 90%.
Borrow Distribution
The two largest borrows of WETH are against USDC collateral.
These positions are at risk of liquidation should ETH’s price increase.
Recommendation
Given the on-chain liquidity and user positions, we recommend a 50% increase in both borrow and supply caps, to 18K ETH and 9K ETH, respectively.
USDC
Motivation
USDC’s supply and borrow caps stand at 79% and 70% utilization, respectively, following consistent growth in both.
Supply Distribution
The two top suppliers are the users mentioned above, while some other top suppliers do not borrow against their USDC.
WETH represents virtually all borrows against USDC collateral.
Borrow Distribution
USDC borrows are comparatively well distributed.
Nearly all of the collateral assets against USDC are WETH or ETH LSTs.
Recommendation
Given the on-chain liquidity and user positions, we recommend doubling the supply and borrow caps.
Specification
| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Base | WETH | 12,000 | 18,000 | 6,000 | 9,000 |
| Base | USDC | 30,000,000 | 60,000,000 | 27,000,000 | 54,000,000 |
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