Summary
A proposal to increase the supply and borrow caps on WETH and wstETH on V3 Scroll
Motivation
WETH (Scroll)
WETH supply cap is at 100% utilization with the borrow cap utilization at 58%
Supply Distribution
The top two suppliers are responsible for 33% of the total supply, making the market relatively distributed. They are each borrowing USDC against their WETH collateral, with health scores of 1.32 and 2.39, respectively.
There is relatively little collateral at risk for the market in its current state, and collateral at risk does not increase sharply until ETH drops below $2,6500.
Recommendation
Given on-chain liquidity and user behavior, we recommend increasing the supply and borrow cap by 50%.
wstETH (Scroll)
wstETH supply cap is at 100% utilization with the borrow cap utilization at 56%
Supply Distribution
The top supplier is responsible for 25% of the total supply, borrowing $1.85M in WETH against his $2.06M wstETH collateral, putting the position at minimal risk of liquidation.
In addition, two suppliers within the top ten are borrowing USDC against wstETH, exposing these positions to higher liquidation risk. Collectively, there is $788K in USDC borrowed against wstETH. These positions would be liquidated effectively, given current liquidity levels.
Recommendation
Given on-chain liquidity and user behavior, we recommend doubling the supply cap with no change to the borrow cap
Specification
| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Scroll | WETH | 3,000 | 4,500 | 2,400 | 3,600 |
| Scroll | wstETH | 2,000 | 4,000 | 90 | No Change |
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