Summary
This publication proposes increasing the Metis Supply Cap on Metis v3 from 7.5k units to 75k units and increasing the WETH Supply Cap on Metis v3 from 50 units to 500 units.
Abstract
The Metis Supply Cap on Metis v3 is at 99.73% utilization. This publication presents the community an opportunity to raise the Metis Supply Cap by 900% to 75k units.
There is ample liquidity for Metis to USDC swaps to occur when liquidating the largest Metis holdings. At the time of writing, the circulating Metis supply on Metis is 4,354,321 units , 58057% of the supply is 75k units.
Also, the WETH Supply Cap on Metis v3 is at 100% utilization. This publication presents the community an opportunity to raise the ETH Supply Cap by 900% to 500 units.
There is ample liquidity for WETH to Metis to USDC swaps to occur when liquidating the largest WETH holdings. At the time of writing, the circulating WETH supply on Metis is 3,186.788 units , 637% of the supply is 500 units.
Motivation
The Metis Supply Cap on Metis v3 is at 99.73% utilization. This publication presents the community an opportunity to raise the Metis Supply Cap by 900% to 75k units. There is ample liquidity for Metis to USDC swaps to occur when liquidating the largest Metis holdings. At the time of writing, the circulating Metis supply on Metis is 4,354,321 units , 58057% of the supply is 75k units.
750 Metis can be swapped to USDC for 1.39% price impact via OpenOcean on Metis.
The WETH Supply Cap on Metis v3 is at 100% utilization. This publication presents the community an opportunity to raise the ETH Supply Cap by 900% to 500 units. There is ample liquidity for WETH to Metis to USDC swaps to occur when liquidating the largest WETH holdings. At the time of writing, the circulating WETH supply on Metis is 3,186.788 units , 637% of the supply is 500 units.
1 Like
5 WETH can be swapped to USDC for 1.47% price impact via OpenOcean on Metis.
With reference to the new ARFC Aave V3 Caps update Framework it is possible to ship several upgrades to gradually increasing Aaveâs exposure to Metis over time.
Specification
The following risk parameters have been proposed for the community to review and discuss in the comments section.
Ticker: Metis
Parameter: SupplyCap
Current Value: 7500
Proposed Value: 75000
Ticker: WETH
Contract: WETH: 0x420000000000000000000000000000000000000A
Parameter: SupplyCap
Current Value: 50
Proposed Value: 500
Copyright
Copyright and related rights waived via CC0.
Sorry I had to put it in two posts. Limitations on links and pictures for new users.
â[EzR3aL] There are plenty âsupply cap increase ARFCâ if you want to copy & paste them.â Increase Metis and WETH Supply Cap on Metis - #4 by EzR3aL
Original source: [ARFC] wstETH Supply Cap Increase Arbitrum v3
Hello @awbvious, thanks for publishing this ARFC,
If risk teams vibes with it, the ACI will be happy to publish it on snapshot, and if outcome is successful, write this proposal code and publish it on your behalf.
Considering the current liquidity levels to support liquidations on Metis DEXâs, we do not recommend increasing the caps for METIS and WETHat this time.
We are working on integrating the Metis deployment into our systems to continuously monitor and provide recommendations on all risk parameters.
How does one determine acceptable price impact / slippage?
Is it some formula like âif proposal is to increase the amount of supply available, then there must be an ability to swap 3% of the new supply cap at a price impact no greater than 3%â or âthen any % of that cap to swap must have a % of price impact that is the same or less?â (E.g. 5% of the supply cap cannot impact more than 5%, 4% impact no more than 4%, and so forth?)
E.g. I suggest raising cap to 500 WETH, 3% of that is 15 WETH, you tried a swap through an aggregator, and itâs 8.84%, if it was 3%, it would be accepable?
Or is there no rules and itâs just a subjective thing? You pick 15 WETH randomly and saw a higher number than you liked for price impact?
Thanks.
Generally, we make our recommendations on supply caps following our Supply Cap methodology, which can be found here.
As we are currently in the process of integrating Metis into our system to utilize the above methodology, we are now using a more basic approach. The liquidity screenshots presented above demonstrate the quantity of ETH and Metis that can be exchanged with a price impact close to the liquidation bonus threshold. This represents the maximum amount of tokens that could be liquidated profitably. Considering that these figures are currently quite low, we advise against increasing the caps until liquidity improves, and we utilize our methodology to generate more precise and granular recommendations.
Correct me if Iâm wrong. But that âmethodologyâ post basically distills to âwe decide on a case by case basis using human judgement on the asset and historical performance,â right? There is no clear mathematical rules? (There is a formula in there, but it seems to just inform, not actually decide anything.) As for informing based on profitability to liquidate, thatâs a good, mathematical piece of information. But this Liquidations - FAQ says âThe liquidation penalty (or bonus for liquidators) depends on the asset used as collateral. You can find every assetsâ liquidation fee in the risk parameters section.â So I went there. Risk Parameters - Risk . This says you can look at the smart contracts, otherwise hereâs some outdated information on /only two chains/ (neither of which are Metis). Polygon - Risk and Avalanche - Risk . So:
a) what are the liquidation bonus thresholds exactly for these two assets?
b) is the only way you got that information through reading smart contracts?
c) And this is directed to all of Aave / anyone in charge of Aave documentation If thereâs no dashboard, no, say, info.aave.com, that one can go to see in real time the liquidation bonus for each token⌠Why not? How can we get one?
gm @awbvious the liqudiation bonus information can be seen on the app.aave.com for any given reserve that is able to be used as collateral. Below is the liquidation bonus for WETH on Metis, currently set to 7.5%
Ah, thank you for pointing that out. I wonât say itâs uncommon, because it is very common in crypto, but it seems to be that liquidation penalty is one of those pieces of UI information only available once you connect your wallet. Until a user connects their wallet, all they see is a friendly ghost saying âPlease connect your wallet to see your supplies, borrowings, and open positions.â Again, this is very common, but I am not a fan. I much prefer Uniswapâs approach of info.uniswap.org. info.uniswap.org has proved less useful in recent years, but it is nicely available no matter if you connect a wallet or not. Seeing as there is ostensibly non-wallet-required documentation here Risk Parameters - Risk , I suggest it is a good thing to keep it up to date, or again, have a dashboard also not requiring wallet connection.
Again, though, this is not common for Dapps. And, again, I find this unfortunate.
So, the penalty for WETH is 7.5%, which is also the bonus for the benefit. Makes sense. And the price impact of swapping 15 WETH to USDC is 8.84%. And presumably, this is necessary for the liquidator to perform liquidation. Thus, presumably, it would be financially disadvantageous to a liquidator at -1.34% to liquidate 15 WETH. Okay, all makes sense.
But where does 15 WETH come from? Why that number? Is it the most WETH that any one account can offer as collateral? The most any liquidator can liquidate? As far as I know, there is no limit to any one account depositing collateral (as that would probably be pointless when it is very cheap to open many accounts, especially on a sidechain like Metis). Further, it would be pointless to have such a limit on liquidators for the same reason.
I suggested raising the cap from 50 to 500. How does 15 WETH fit into that? Why that one number? [EDIT: I ask because if there is no particular significance, could not one simply keep upping the number until it fits their predetermined hypothesis? I.e. a form of âp-hacking?â]
Thanks.
