Summary
A proposal to:
- Increase ZK’s supply cap on the ZkSync Main instance.
- Increase USDC’s supply cap on the ZkSync Main instance.
ZK (ZkSync-Main)
ZK has reached 72% of its supply cap, while its borrow cap remains lightly utilized at 9%.
Supply Distribution
The supply distribution of ZK is not concentrated, with the largest supplier accounting for just 9% of the total supply.
Most top positions have no borrowing activity, presenting no liquidation risk at this time. The three positions with borrowing activities are borrowing highly liquid stablecoins against ZK, further reducing risks. Additionally, the two positions borrowing USDC against ZK have high health scores of 1.75 and 1.94, indicating no significant concerns at this moment.
Liquidity
ZK-USDC’s DEX liquidity has shown a strong upward trend over the past month, with a 3M ZK swap for USDC incurring less than 4% price slippage, supporting a supply cap increase.
Recommendation
Given user behavior and stable on-chain liquidity, we recommend doubling its supply cap. This increase is backed by Chaos Labs’ risk simulations, which consider user behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
USDC (ZkSync-Main)
USDC’s supply cap is fully utilized at 100%, while its borrow cap utilization stands at 59%.
Supply Distribution
The supply of USDC is well distributed, with none of the top suppliers borrowing against their USDC, keeping this market at a very low risk of significant liquidation events.
ZK is the largest borrowed asset against USDC, accounting for 54.52% of the total borrowed assets. However, the borrowed ZK amounts to only $37K, which is minimal compared to the total supply, significantly reducing the risk of large-scale liquidations.
Liquidity
As shown below, USDC’s liquidity paired with USDT has fluctuated over the past month but shows no signs of consistent decline.
Although the liquidity is relatively small compared to the total supply, our analysis of top supplier behavior and the relatively low amount of borrowed assets against USDC suggests that this does not present any significant concerns.
Recommendation
Given user distribution and on-chain liquidity, we recommend doubling the supply cap. This increase is backed by Chaos Labs’ risk simulations, which consider user behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
Specification
| Chain | Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|---|
| ZkSync | Main | ZK | 72,000,000 | 144,000,000 | 10,000,000 | - |
| ZkSync | Main | USDC | 2,000,000 | 4,000,000 | 1,800,000 | - |
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