[ARFC] Polygon Supply Cap Update 07.07.2023

Governance
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title: [ARFC] Polygon Supply Cap Update 07.07.2023
author: @Llamaxyz - @TokenLogic
created: 2023-07-07

Summary

This publication proposes increasing the MaticX Supply Cap on Polygon v3 from 38.0M units to 50.6M units.

Motivation

The current Supply Cap’s utilisation is hovering around 87.9%, with 4.6M units of MaticX deposit capacity. Discussions with Stader Labs indicates a whale of approximately 10M-15M units is going to deposit on Aave v3. The current supply cap prohibites the full deposit and entering the yield maximising strategy.

With Liquidity Mining (LM) ongoing, MaticX deposit rewards (SD) and wMATIC borrowing rewards (stMATIC & MaticX), it is important that Aave DAO ensures there is adequate capacity to enable the yield maximising strategies to grow.

With an abundance of wMATIC deposits and LM ongoing, we are experiencing exception MaticX deposit growth.

Screenshot 2023-07-07 at 18.36.23

To facilitate the continued growth of MaticX, this proposal seeks to increase the Supply Cap to 75% of supply on Polygon. This is the maximum counterparty risk Aave DAO has voted to support.

Current MaticX supply on Polygon is 67,440,058 units. Therefore the newly proposed Supply Cap is 50,600,000 units (rounded up).

With reference to the ARFC Aave V3 Caps update Framework and Direct to AIP Framework the preferred path forward is to implement several upgrades to gradually increase Aave’s MaticX exposure over time whilst bypassing Snapshot.

Specification

Ticker: MaticX

Contract: polygon: 0xfa68FB4628DFF1028CFEc22b4162FCcd0d45efb6

Parameter Current Value Proposed Value
SupplyCap 38.0M units 50.6M units

Copyright

Copyright and related rights waived via CC0.

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Utilizing our LSD supply cap methodology, and given the Community Preference for Supply Cap Limits for LSTs, we support the proposed increase to the MaticX supply cap.

Once we receive feedback from @Gauntlet on the above recommendations, we will be able to move forward to implement these updates via the Risk Steward process.

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Tagging @Gauntlet for visibility.

If there is no response by day 5, tomorrow, then we will publish a Snapshot vote.

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Thanks @Llamaxyz for the post. As we have stated previously, Gauntlet prefers to wait until community alignment on potential killswitch options before increasing supply caps beyond what our original methodology recommends. These killswitch options necessarily help reduce risk when an LST depeg event occurs, something that we cannot predict in terms of likelihood, point in time, nature, duration, or magnitude.

Should the community wish to increase the MaticX cap on Polygon, it should go through AIP.

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as this proposal was not controversial and failed to reach the quorum mainly due to the main delegates being at EthCC.

Unless there’s vocal opposition, the ACI will rebroadcast this AIP for a vote tomorrow.

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AIP-278 has been published.

Voting starts tomorrow.

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