[ARFC] Risk Steward Parameter Updates Phase 3

Governance General
1

[ARFC] Risk Steward Parameter Updates Phase 3

Author: ACI

Date: 2025-02-18

Simple Summary

This proposal aims to update the Risk Steward parameters to enhance the efficiency of risk parameter management and reduce governance overhead.

Motivation

The Risk Steward mechanism has proven to be an effective tool for managing risk parameters without requiring full governance proposals. After several months of successful operation, we propose updating the parameters to allow for more responsive risk management while maintaining appropriate safety constraints.

Technical service providers spend significant time reviewing risk parameter update AIPs, which could be more efficiently handled through the Risk Steward mechanism. With well-defined processes in place and months of successful operation, we can safely expand the scope of parameter adjustments allowed through this system.

Specification

The following parameter updates are proposed for the Risk Steward:

Updated Parameters

  • Supply and Borrow Caps: 100% relative change with 3 days minimum delay
  • Debt Ceiling: 20% relative change with 3 days minimum delay
  • LST Cap adapter params: 5% relative change with 3 days minimum delay
  • Stable price cap: 0.5% relative change with 3 days minimum delay
  • Base Variable Borrow Rate: 1% absolute change with 3 days minimum delay
  • Slope 1: 1% absolute change with 3 days minimum delay
  • Slope 2: 20% absolute change with 3 days minimum delay
  • Optimal Point (Kink): 3% absolute change with 3 days minimum delay
  • Loan to Value (LTV): 2% absolute change with 3 days minimum delay
  • Liquidation Threshold: 2% absolute change with 3 days minimum delay
  • Liquidation Bonus: 3% absolute change with 3 days minimum delay

Security Considerations

The proposed parameter updates maintain conservative limits while allowing for more efficient risk management. The minimum delay periods ensure adequate time for review and response to any changes.

Implementation

The implementation will require updating the RiskSteward smart contract with the new parameter constraints.

Useful Links

Next Steps

  1. Collect community & service providers feedback before escalating proposal to ARFC snapshot stage.
  2. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal.

Disclaimer

ACI did not received payment for the creation of this proposal.

Copyright

Copyright and related rights waived via CC0

2 Likes
2

Hi @ACI,

This upgrade is both necessary and long overdue. While the 0.50% Borrow Rate parameter limitation has been effective during periods of low volatility in funding rates, recent developments—such as the introduction of sUSDe and Ethena Sats alongside rising perp funding rates—have led to increased volatility.

Allowing Risk Stewards to adjust Borrow Rate parameters by 1% every three days provides greater flexibility to respond to market dynamics. When applied proactively, this adjustment range is expected to be sufficient for the vast majority of market conditions, ensuring a more adaptive and resilient approach.

2 Likes
3

LlamaRisk supports these changes, which are within reasonable boundaries and will result in faster adaptability and reduced governance overhead. We have collaborated closely as reviewers of @ChaosLabs’ work for almost a year and hold their work in high regard.

Comparison table of proposed changes

Parameter Current Proposed
Supply & Borrow Caps 100% relative (no change)
Debt Ceiling 20% relative (no change)
LST Cap adapter params 5% relative (no change)
Stable price cap 0.5% relative (no change)
Base Variable Borrow Rate 0.5% absolute 1% absolute
Slope 1 0.5% absolute 1% absolute
Slope 2 5% absolute 20% absolute
Optimal Point (Kink) 3% absolute (no change)
Loan to Value (LTV) 0.25% absolute 2% absolute
Liquidation Threshold 0.25% absolute 2% absolute
Liquidation Bonus 0.5% absolute 3% absolute

(no change to minimum delay)

2 Likes