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
LT, LTV and LB decreased to 0.5% 2025-03-12
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): 0.5% absolute change with 3 days minimum delay
Liquidation Threshold: 0.5% absolute change with 3 days minimum delay
Liquidation Bonus: 0.5% 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
Collect community & service providers feedback before escalating proposal to ARFC snapshot stage.
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.
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.
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.
We thank @ACI for the creation of this proposal. Chaos Labs fully supports the Risk Steward parameters proposed.
These parameters are a significant step forward to increase the efficency of the market and streamline the execution of Interest Rate changes.