As can be seen in the table below, provided in the Chaos Labs LSD Methodology Update, MaticX serves mainly as collateral for borrowing MATIC in E-Mode.
Since the oracle for MaticX is based on the underlying asset’s (MATIC) price, the risk of liquidation is minimal. As a result, we are confident in increasing the caps from a market risk perspective, assuming there is no significant change in user behavior or position distribution.
The primary risk involved in this case is counterparty risk. While Chaos Labs suggests limiting the supply cap to 50% of the total circulating supply, the community has opted for a more aggressive approach. Therefore, the community should determine its desired risk appetite for this specific proposal.