[ARFC] - Chaos Labs Risk Stewards - Increase Supply and Borrow Caps on V3 Gnosis - 11.10.2023

Governance
1

Summary

A proposal to increase:

Gnosis

  • wstETH - Supply Cap
  • sDAI - Supply Cap
  • WXDAI - Supply and Borrow Cap
  • USDC - Supply and Borrow Cap
  • EURe - Supply and Borrow Cap

Motivation

Following the launch of the GnosisChain market, we have observed high demand with several supply and borrow caps reaching high utilization.

While we continue to integrate the new Gnosis deployment into our simulation platform, the recommendations below were made utilizing Chaos’ supply and borrow cap framework for new assets and deployments, where we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact. Given the observed liquidity of the suggested assets, we recommend:

  • WXDAI, sDAI, USDC, EURe - doubling the supply cap and setting the borrow cap at 0.9*supply cap
  • wstETH - increase supply cap to 5,000

Specification

Chain Asset Current Supply Cap Recommended Supply Cap Current Borrow Cap Recommended Borrow Cap
Gnosis wstETH 4,000 5,000 400 No Change
Gnosis WXDAI 1,500,000 3,000,000 1,500,000 2,700,000
Gnosis sDAI 1,500,000 3,000,000 N/A N/A
Gnosis USDC 1,000,000 2,000,000 1,000,000 1,800,000
Gnosis EURe 500,000 1,000,000 500,000 900,000

Next Steps

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

4 Likes
2

complete support for this proposal.

1 Like
3

Gauntlet supports the wstETH supply cap increase to 5000 and the sDAI supply cap increase to 3m.

We’ve stated in our original analysis of Gnosis that the biggest challenge is limited nonstable-stablecoin liquidity. While liquidity has increased via the wstETH-sDAI pool, a market sell of ~250 wstETH into stables via this wstETH-sDAI pool as well as the wstETH-staBAL pool incurs slippage of liquidation penalty ~6%.

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As a result, we recommend more cautiously increasing caps for WXDAI, USDC, and EURe to balance weaker liquidity between stable-nonstables, facilitating recursive LST strategies, and stablecoin demand.

Given lower usages of xDAI, USDC, EURe

  • xDAI supply cap is at 66% usage, borrow cap at 53% usage
  • USDC supply cap is at 60% usage, borrow cap at 33% usage
  • EURe supply cap is at 50% usage, borrow cap is at 27% usage

We recommend the following increases.

Chain Asset Cap Current Recommended
Gnosis wstETH Supply 4000 5000
Gnosis sDAI Supply 1.5m 3m
Gnosis xDAI Supply 1.5m 2.3m
Gnosis xDAI Borrow 1.5m 2.3m
Gnosis USDC Supply 1m 1.5m
Gnosis USDC Borrow 1m 1.5m
Gnosis EURe Supply 500k 750k
Gnosis EURe Borrow 500k 750k
2 Likes
4

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

1 Like
5

This has been executed via risk steward.

1 Like