Summary
A proposal to:
- Increase sUSDe’s supply cap on Aave’s V3 Ethereum main instance.
- Increase sUSDe’s supply cap on Aave’s V3 Ethereum Lido instance.
sUSDe (Ethereum Main)
sUSDe has reached 100% supply cap utilization on Ethereum, and its Isolated Debt Ceiling is at 25.5% capacity.
Supply Distribution
All of the top sUSDe suppliers use it as collateral to borrow other stablecoins. Given the high correlation between the collateral and borrowed assets, none of the top positions pose a liquidation risk despite maintaining health scores below 1.2.
Overall, USDT represents 56.3% of the value borrowed against sUSDe.
Liquidity
The buy liquidity available for sUSDe has increased significantly since the start of October and is sufficient to process any of the above positions in the event of liquidation.
Recommendation
Given the high correlation between collateral and borrowed assets and the recent increase in liquidity, we recommend doubling the supply cap. This increase is backed by Chaos Labs’ risk simulations, which consider user’s behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
sUSDe (Ethereum Lido)
sUSDe has reached 100% supply cap utilization on the Ethereum Lido instance. The supply cap was reached within 5 minutes after listing.
Supply Distribution
The majority of the sUSDe supply in the Lido market is concentrated among six users, three of whom hold supply-only positions. The only borrowed asset by the remaining positions is USDS, with all borrowers maintaining very safe health scores above 1.40. Due to the high correlation between sUSDe and USDS, none of these positions pose a significant liquidation risk.
Recommendation
Given the high correlation between collateral and borrowed assets and the safe user’s behavior, we recommend doubling the supply cap. This increase is backed by Chaos Labs’ risk simulations, which consider user’s 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 |
|---|---|---|---|---|---|---|
| Ethereum | Main | sUSDe | 16,000,000 | 32,000,000 | - | - |
| Ethereum | Lido | sUSDe | 20,000,000 | 40,000,000 | - | - |
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