[ARFC] Increase stMATIC SupplyCap

title: [ARFC] Increase stMATIC Supply Cap
author: @Llama - @TokenLogic
dated: 2023-05-05


This publication proposes increasing the stMATIC Supply Cap from 21.0M to 30.0M units.


Recently, the Supply Cap of stMATIC was increased from 21.0M units to 25.0M units. Within a few days, the Supply Cap was reached.

The recent increase in stMATIC deposits is from users entering the yield maximising strategy. This type of interaction with Aave Protocol is deemed lower risk than borrowing less price correlated assets.

As a result of how recent new users have interacted with Aave Protocol this publication seeks to increase the Supply Cap of stMATIC from 25.0 to 30.0M which is 1.0M units larger than the previous increase.

If new users continue to interact with Aave Protocol by depositing stMATIC and looping, not borrowing stable coins, then there is an opportunity to walk the Supply Cap higher over time.


The above chart shows the pent up demand awaiting Supply Cap increases. The right mose part of the chart shows a rapid increase in utilisation as soon as the Supply Cap was lifted.

The chart above shows that since the 25.0M Supply Cap proposal had been originally proposed, the supply of stMATIC on Polygon has only increased slightly. Consequently, 50% of supply is 25,825,944 which can be rounded to 25.8M units, ie: 0.8M additional units on Polygon.

The image above shows one of the recently holders entering the yield maximising strategy. Notice this address has over 104k units of stMATIC idle. The current Supply Cap denies this user the ability to deposit more than 8,864.49 units of stMATIC.

Screenshot 2023-05-05 at 22.28.40

Over the last week or so, liquidity for stMATIC has been consistent. The chart below shows the impact of a 1%, 3% and 5% swap from stMATIC to wMATIC via Paraswap on Polygon. A 3% price impact swap enables a liquidater to sell 10.92M units of stMATIC.

Liquidators could deposit Asset on Aave v3, borrow wMATIC, liquidate a position, receive stMATIC and swap for wMATIC to repay the loan easily enough.

When the loan is nominated in stable coins, the swap route would go stMATIC to wMATIC to stable coin. This means stMATIC is heavily dependent on wMATIC to stable coin liquidity as wMATIC itself.


The following risk parameters changes are presented:

Ticker: stMATIC

Contract: polygon:0x3a58a54c066fdc0f2d55fc9c89f0415c92ebf3c4

Parameter Current Value Proposed Value
SupplyCap 25M units 30M units


Copyright and related rights waived via CC0.


The demand for stMatic on Aave is clearly visible and we’re in support of increasing the supply cap.

After the recent increase in the supply cap from 21M to 25M, we have observed significant positions borrowing wMATIC against their stMATIC collateral, as evidenced here and here.

The proposal above suggests raising the supply cap to 30M, which amounts to approximately 58% of the total circulating supply on Polygon.

Given the distribution of the positions leaning more towards the stMATIC-wMATIC loop and sufficient on-chain liquidity to support liquidations of other positions (stMATIC-stables), we support this proposal following the community’s preference voted on here.

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Gauntlet finds no outsized market risk with this proposal if the Chainlink Synchronicity Price Adapter (CSPA) is implemented for stMATIC.

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