# \[ARFC\] Chaos Labs Risk Stewards - Increase Supply Cap for wstETH on V3 Polygon - 04.16.2024

**URL:** https://governance.aave.com/t/arfc-chaos-labs-risk-stewards-increase-supply-cap-for-wsteth-on-v3-polygon-04-16-2024/17378
**Category:** Governance
**Created:** [April 16, 2024, 5:52pm UTC](https://governance.aave.com/t/arfc-chaos-labs-risk-stewards-increase-supply-cap-for-wsteth-on-v3-polygon-04-16-2024/17378 "2024-04-16T17:52:54Z")
**Posts on this page:** 3
**Page:** 1

<div class="post-metadata">

### Author: ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [April 16, 2024, 5:52pm UTC](https://governance.aave.com/t/arfc-chaos-labs-risk-stewards-increase-supply-cap-for-wsteth-on-v3-polygon-04-16-2024/17378/1 "2024-04-16T17:52:54Z")

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## Summary

A proposal to:

- increase the wstETH supply cap on Aave V3’s Polygon deployment.

## wstETH

### Motivation

wstETH has nearly reached its supply cap on Polygon following new deposits.

 ![Untitled - 2024-04-16T135151.728](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/409f22912b911545e7f766dbb34e5f4c47332512.png)

 ![Untitled - 2024-04-16T135154.302](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/3/385cefd69cfb83cfdc9d90162f1802552a2ed042.png)

### Supply Distribution

Most of the top suppliers are looping WETH and wstETH, putting these positions at limited danger of liquidations.

 ![Untitled - 2024-04-16T135155.907](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/6/60cb7ad624817eb2066712309d69bd8b1ec88822.png)

WETH is the most commonly borrowed asset against wstETH collateral, though some users have borrowed stablecoins.

 ![Untitled - 2024-04-16T135157.936](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/3/34f1bce0bd0c80cd3467ec763872dd3faae169ab.png)

### Borrow Distribution

wstETH borrows are limited; the largest is a user who is borrowing against MATIC collateral, putting this position at risk of liquidation should MATIC’s price drop or ETH’s price increase.

 ![Untitled - 2024-04-16T135159.996](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e6e661cbaf7d03cdfd86128ad7f4848f06e628b1.png)

### Recommendation

As per community decision, the upper bound on LST supply caps is 75% of circulating supply on a given chain. This limits us to recommend an increase in wstETH’s supply cap to 5.75K with no change in borrow cap.

## Specification

| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
| --- | --- | --- | --- | --- | --- |
| Polygon | wstETH | 5,250 | 5,750 | 570 | 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](https://creativecommons.org/publicdomain)

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<div class="post-metadata">

### Author: ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)
#### Post date: [April 17, 2024, 1:18pm UTC](https://governance.aave.com/t/arfc-chaos-labs-risk-stewards-increase-supply-cap-for-wsteth-on-v3-polygon-04-16-2024/17378/2 "2024-04-17T13:18:16Z")

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The transaction for this proposal has now been executed.

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<div class="post-metadata">

### Author: ![system](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e11637c36f45ffa158f2146f5c19438d46e0824d.svg) [@system](https://governance.aave.com/u/system)
#### Post date: [May 17, 2024, 1:18pm UTC](https://governance.aave.com/t/arfc-chaos-labs-risk-stewards-increase-supply-cap-for-wsteth-on-v3-polygon-04-16-2024/17378/3 "2024-05-17T13:18:38Z")

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