Summary
A proposal to:
- Increase weETH’s supply caps on Aave’s Ethereum deployment.
Motivation
weETH (Ethereum)
weETH has reached 100% utilization of its supply cap on Ethereum, and its borrow cap is at 27% capacity following significant repayments.
Supply Distribution
Most of the top weETH suppliers borrow WETH against it, with some borrowing weETH itself, along with some wstETH borrows. The total supply is fairly distributed across wallets, with the largest supplier representing 18% of the total. The largest open positions have low liquidation risk, as weETH and WETH are closely correlated.
Overall, ETH-correlated assets represent 99.7% of the value borrowed against weETH.
Recommendation
Given on-chain liquidity, as well as user distribution and behavior, we recommend increasing weETH’s supply cap on Ethereum, while ensuring that potential new WETH borrowing does not bring the WETH market above UOptimal.
Specification
| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum | weETH | 600,000 | 660,000 | 200,000 | - |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
For transparency, we aim to execute the risk steward transaction on July 23th at 10:20 am GMT
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this ARFC.
Copyright
Copyright and related rights waived via CC0.