Summary
A proposal to increase the following caps on V3 Ethereum:
- Supply cap for LUSD
- Supply and Borrow cap for USDT
Motivation
The recommendations below were made utilizing Chaos’ supply and borrow cap methodologies and after analyzing user positions for each asset.
LUSD
The supply cap for LUSD on V3 Ethereum is currently at near 100% utilization.
Please note there is a single account currently supplying nearly 60% of all LUSD, utilizing it to borrow mainly USDT and USDC, with a health score of 1.62.
Considering the market’s concentrated nature, our recommendation is to raise the supply cap by 1.5X. This adjustment would allow for further analysis of additional usage before considering a more aggressive increase. However, we do not advise increasing the borrow cap, as the current utilization remains low.
USDT
The supply and borrow caps for USDT on V3 Ethereum are currently at 88% and 73% utilization, respectivly.
We recommend doubling both supply and borrow caps.
Specification
| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum | LUSD | 12,000,000 | 18,000,000 | 8,000,000 | No Change |
| Ethereum | USDT | 300,000,000 | 600,000,000 | 250,000,000 | 500,000,000 |
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.