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

Summary

A proposal to:

  • Increase cbBTC’s supply cap on Aave’s V3 Ethereum deployment.
  • Increase cbBTC’s supply cap on Aave’s V3 Base deployment.
  • Increase AAVE.e’s supply cap on Aave’s V3 Avalanche deployment.

cbBTC (Ethereum)

cbBTC has reached 100% supply cap utilization on Ethereum, and its borrow cap is at 0% capacity.

image - 2024-09-27T174706.696

image - 2024-09-27T174708.762

Supply Distribution

Most of the top cbBTC suppliers borrow USDC or USDT. The biggest wallet represents an outsized portion of the total supply. Given its low health score and the assets used, the top wallet poses a moderate liquidation risk. The other top wallets maintain safe health scores and pose little liquidation risk.

image - 2024-09-27T174711.303

Overall, USDC represents 82% of the value borrowed against cbBTC.

image - 2024-09-27T174713.730

Recommendation

Given users’ behavior and on-chain liquidity, we recommend increasing the supply cap to 1,200 cbBTC.

cbBTC (Base)

cbBTC has reached 100% supply cap utilization on Base, and its borrow cap is at 2% capacity.

image - 2024-09-27T174716.749

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Supply Distribution

Most of the top cbBTC suppliers borrow WETH or USDC. The biggest wallet represents an outsized portion of the total supply. The top wallet poses a low liquidation risk, given the position’s safe health score. The other top wallets maintain safe health scores and pose little liquidation risk.

image - 2024-09-27T174721.509

Overall, WETH represents 67% of the value borrowed against cbBTC.

image - 2024-09-27T174723.417

Recommendation

Given users’ behavior and on-chain liquidity, we recommend increasing the supply cap to 800 cbBTC.

AAVE.e (Avalanche)

AAVE.e has reached 92% supply cap utilization on Base.

image - 2024-09-27T174726.042

image - 2024-09-27T174728.215

Supply Distribution

Some of the top AAVE.e suppliers borrow USDC or USDT, while others maintain a supply-only position. The distribution of AAVE.e supply among the top wallets is not heavily concentrated. All the top wallets maintain a safe health score and a varied choice of collateral, so they pose little to no risk of liquidation.

image - 2024-09-27T174730.360

Overall, USDC represents 38% of the value borrowed against AAVE.e.

image - 2024-09-27T174732.817

Recommendation

Given users’ behavior and on-chain liquidity, we recommend increasing the supply cap to 7,200 AAVE.e

Specification

Chain Asset Current Supply Cap Recommended Supply Cap Current Borrow Cap Recommended Borrow Cap
Ethereum cbBTC 900 1,200 45 -
Base cbBTC 400 800 20 -
Avalanche AAVE.e 5,800 7,200 - -

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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