[ARFC] Chaos Labs Risk Stewards - Increase Supply Caps on Aave V3 - 02.03.25

Summary

A proposal to:

  • Increase osETH’s supply cap on the Ethereum Core instance.

osETH (Ethereum Core)

The supply cap for osETH has reached 97% utilization.

Supply Distribution

The largest supplier of osETH holds approximately 36% of the total osETH supply, indicating a concentration risk. However, since this user is borrowing WETH, the risk of liquidation is significantly mitigated. Among the remaining top suppliers, all are either borrowing WETH or maintaining a high health score (>3.4), thereby presenting limited liquidation risk at this time.

The largest borrowed asset against osETH is WETH, accounting for approximately 97.61% of the borrowed asset distribution, significantly reducing the likelihood of large-scale liquidations.

Liquidity

osETH’s liquidity has remained relatively stable, with a 10K osETH sell currently incurring less than 7.5% price slippage.

Recommendation

Given user behavior and on-chain liquidity, we recommend doubling the supply cap.

Specification

Instance Asset Current Supply Cap Recommended Supply Cap Current Borrow Cap Recommended Borrow Cap
Ethereum Core osETH 40,000 80,000 1 -

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

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