[ARFC] Increase supply cap for cbETH Aave Ethereum V3 - 20230317

[MarcZeller]

Author: @marczeller - Aave Chan Initiative

Date: 2023-03-17

Summary:

This ARFC proposes to increase the cbETH supply cap on the Aave V3 Ethereum market. cbETH is a centralized Liquid Staking Derivative minted by Coinbase and is created when users stake ETH. The proposal aims to raise the supply cap to 30k cbETH to meet market demand for depositing this asset.

Abstract:

The ARFC proposes increasing the cbETH supply cap to 30k cbETH in order to accommodate market demand for depositing the asset. This will allow new Aave users to use Aave V3 and enable current users to increase their positions’ sizes.

Motivation:

With cbETH currently at ~98% of its supply cap on Aave V3, increasing the cap will allow more users to utilize the platform and meet market demand. The recent Euler exploit has created additional demand for deposits that cannot be accommodated due to the current cap. The proposed cap of 30k cbETH offers a balance between accommodating demand and maintaining a conservative approach. Furthermore, this 50% increase from the current cap adheres to the “direct-to-AIP” framework, enabling a rapid response to the high demand for cbETH on Aave.

Specification:

• Ticker: cbETH (cbETH)
• Contract Address: 0xbe9895146f7af43049ca1c1ae358b0541ea49704
• Parameters:
  • Current Supply Cap: 20,000
  • Proposed Supply Cap: 30,000

Disclaimer:

The Aave-Chan Initiative is not affiliated with or paid by Coinbase to publish this ARFC. At the time of writing, The author holds a position in cbETH of ~$16.5k.

Copyright:

Copyright and related rights waived via CC0.

[ChaosLabs]

Thanks for putting this proposal forward @MarcZeller

As we mentioned here, our supply cap methodology recommends increasing the caps by 2X.
However, there is a live vote to include cbETH in the eth-correlated emode, which will change the asset’s usage and risk profile. Therefore, we recommend prudently increasing the cap to 30K cbETH, to observe the behavior of borrowers and suppliers with this new configuration.

[MarcZeller]

Hello and thanks for your reply, Shanghai is scheduled to the 12th of April, and both risk teams have models that make them overly conservative on LSDs assets which is hurting Aave’s growth because the assets are strategic for the protocol.

raising to 30k means I’ll write another raising cap before the weekend but in the interest of making things move forward, I’ll update this ARFC and post the AIP for a 30k supply cap today.

[ponzinomic]

@MarcZeller what is the earliest this would be implemented?

[ChaosLabs]

The supply cap increase to 30K cbETH has been executed and has once again been reached.

Following the inclusion of cbETH into the ETH-correlated E-mode last week, our team is analyzing its effect on the distribution of positions and will share an updated supply cap recommendation shortly.