Summary
A proposal to:
- Increase sUSDe’s supply cap on Aave’s V3 Ethereum main instance.
- Increase weETH’s supply cap on Aave’s V3 Base main instance.
sUSDe (Ethereum)
sUSDe has reached 76% supply cap utilization on Ethereum; the asset is not borrowable and its debt ceiling of $40M is 10% utilized.
Supply Distribution
All of the top sUSDe suppliers are using the asset to borrow either USDT or USDC, putting these positions at low risk of liquidation given their correlation.
Additionally, sUSDe liquidity has improved in recent weeks, indicating that any liquidations could be efficiently processed.
Recommendation
Given user behavior and on-chain liquidity, we recommend doubling the supply cap. This increase is backed by Chaos Labs’ risk simulations, which consider the user’s behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
weETH (Base)
weETH has reached 100% supply cap utilization on Base and its borrow cap is at 8% capacity.
Supply Distribution
All but one of the top weETH suppliers uses it as collateral to borrow WETH, the exception uses the asset to loop with itself. The top position represents a significant portion of the supply, which indicates high supply concentration. However, due to the correlation between the collateral and borrow assets, none of these positions poses a significant liquidation risk.
Overall, WETH represents 97.11% of the value borrowed against weETH.
Recommendation
Given the high correlation between the borrow and supply assets, but the limited on-chain supply of weETH, we recommend increasing the supply cap to 32,000 weETH. This increase is backed by Chaos Labs’ risk simulations, which consider the user’s behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
Specification
| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum | sUSDe | 8,000,000 | 16,000,000 | - | - |
| Base | weETH | 28,600 | 32,000 | 9,000 | - |
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