[ARFC] - Chaos Labs Risk Stewards - Increase Supply and Borrow Caps on V3 Ethereum and Arbitrum- 11.02.2023

[ChaosLabs]

[ARFC] - Chaos Labs Risk Stewards - Increase Supply and Borrow Caps on V3 Ethereum - 09.25.2023

Summary

Arbitrum:

• Supply cap for rETH

Ethereum

• Borrow cap for rETH

Motivation

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

rETH (Arbitrum)

The supply cap for rETH on V3 Arbitrum is currently at 93% utilization.

We recommend doubling the supply cap to 6.8k.

Please note there is a single account currently supplying nearly 40% of all rETH, utilizing it to borrow WETH. While this is a relatively significant concentration for a single user, the usage and risk profile does not impact the recommendation.

rETH (Ethereum)

The borrow cap for rETH on V3 Arbitrum is currently at 89% utilization.

We recommend doubling the borrow cap to 19.2k.

Specification

Chain	Asset	Current Supply Cap	Recommended Supply Cap	Current Borrow Cap	Recommended Borrow Cap
Ethereum	rETH	60,000	No Change	9,600	19,200
Arbitrum	rETH	3,400	6,800	680	No Change

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.

[Gauntlet]

Gauntlet supports the borrow cap increase for rETH on Ethereum v3.

For Arbitrum v3 - supply cap usage has declined down to 60%. We recommend considering to raise caps should usage increase to previous levels.

Borrow cap usage for rETH is also at 92%. The cap was previously updated on 2023-11-02. Given 5 day window between cap updates, should cap usage remain as high on 2023-11-07, we will reassess borrow caps for rETH then.

[ChaosLabs]

We have created the transaction with the update to the rETH borrow cap on V3 Ethereum.
The transaction can be found here.

[Gauntlet]

This has been updated via risk steward.