Overview
Following the launch of the ZK token several weeks ago, we recommend adding it to the upcoming zkSync deployment. Chaos Labs supports listing ZK on Aave v3’s zkSync deployment. Below is our analysis and initial risk parameter recommendations.
ZK
Market Cap and Liquidity
When analyzing market cap and trading volumes of assets for listing, we typically look at data from the past 180 days. In ZK’s case, this is constrained to June 17th (TGE) onward. ZK’s average market cap in this span was $650 million, and its average daily trading volume was $365 million (across CeFi and DeFi). We find this market cap adequate and the trading volumes reasonable as long as they are considered when setting appropriate supply caps, a debt ceiling, and borrow caps.
On zkSync Era, ZK’s liquidity is primarily divided between a ZK / WETH pool on SyncSwap and a ZK / WETH 0.25% pool on PancakeSwap v3. The former has $6,476,174 in TVL, while the latter has just $1,480,827 in TVL.
ZK / USD Volatility
Relative to USD, ZK’s 30-day daily annualized volatility is 139.9%, with a maximum single-day price deviation of 22.01%.
Liquidation Threshold
Considering the high volatility of ZK relative to USD, we recommend setting the LT to 45%.
Debt Ceiling
Following Chaos Labs’ Isolation Mode Methodology, we recommend an initial debt ceiling of $1M. Under the methodology for Isolation Mode, we consider two levels of probabilities for extreme price drops - Medium-High and High. We estimate the probability of an extreme price drop for ZK as High.
Supply Cap, Borrow Cap, and Liquidation Bonus
Following Chaos Labs’ approach to initial supply caps, we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact.
Given the liquidity of ZK, we recommend a 10% Liquidation Bonus, a supply cap of 24,000,000 ZK, and a borrow cap of 10,000,000 ZK.
Recommendations
Following the above analysis, we recommend listing ZK with the following parameter settings:
Following the above analysis, we recommend the following parameters:
| USDC | USDT | WETH | wstETH | ZK | |
|---|---|---|---|---|---|
| Isolation Mode | NO | NO | NO | NO | YES |
| Enable Borrow | YES | YES | YES | YES | YES |
| Enable Collateral | YES | YES | YES | YES | YES |
| E-Mode Category | N/A | N/A | ETH Correlated | ETH Correlated | N/A |
| Loan To Value | 75% | 75% | 75% | 71% | 40% |
| Liquidation Threshold | 78% | 78% | 78% | 76% | 45% |
| Liquidation Bonus | 5% | 5% | 6% | 7% | 10% |
| Reserve Factor | 10% | 10% | 15% | 5% | 20% |
| Liquidation Protocol Fee | 10% | 10% | 10% | 10% | 20% |
| Borrow Cap | 900,000 | 2,700,000 | 900 | 30 | 10,000,000 |
| Supply Cap | 1,000,000 | 3,000,000 | 1,000 | 300 | 18,000,000 |
| Debt Ceiling | N/A | N/A | N/A | N/A | $800,000 |
| uOptimal | 90% | 90% | 90% | 45% | 45% |
| Base | 0% | 0% | 0% | 0% | 0% |
| Slope1 | 5.5% | 5.5% | 2.7% | 4.5% | 9% |
| Slope2 | 60% | 60% | 80% | 80% | 300% |
| Stable Borrowing | Disabled | Disabled | Disabled | Disabled | Disabled |
| Flashloanable | YES | YES | YES | YES | YES |
| Siloed Borrowing | NO | NO | NO | NO | NO |
| Borrowable in Isolation | YES | YES | NO | NO | NO |
Capo
| maxYearlyRatioGrowthPercent | ratioReferenceTime | MINIMUM_SNAPSHOT_DELAY |
|---|---|---|
| 9.68% | monthly | 7 days |
E-Mode Parameters
| LTV | LT | Liquidation Penalty |
|---|---|---|
| 90% | 93% | 1% |
We have updated the table in our original recommendation.