A proposal to increase the supply cap of USDC.e on V3 Polygon.
Motivation
A proposal to onboard native USDC to Polygon was executed on AIP-409. The proposal reduced USDC.e supply caps to limit new deposits on Polygon, promoting the migration to the native version. As a result of this proposal’s implementation, the supply cap for USDC.e was set at 40M, with a total supply of 44.07M.
Concurrently, AIP-414, a treasury management proposal for migrating DAO assets from V2 to V3 on Polygon, was approved. This plan involves transferring 2.34M USDC.e to V3. However, the current supply and supply cap constraints make the execution of this proposal unfeasible.
To enable this transaction, we recommend increasing the supply cap of USDC.e to 48M through the Risk Steward process. Moreover, a secondary transaction will be initiated to execute the payload of AIP-414, ensuring the new supply cap is not immediately exceeded following the increase.
Additionally, to preserve the balance in utilization ratios, we recommend increasing the borrow cap in proportion to the supply cap increase. This step is crucial to maintain the equilibrium of borrow rates following these changes.
Specification
Chain
Asset
Current Supply Cap
Recommended Supply Cap
Current Borrow Cap
Recommended Borrow Cap
Polygon
USDC.e
40,000,000
48,000,000
36,000,000
43,500,000
Next Steps
As @gauntlet has approved this proposal, we will move forward to implement these updates via the Risk Steward process.
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this ARFC.
From the technical side, we can confirm that we have recommended the usage of the Risk Steward procedure in order to not create governance overhead, and based on the following:
Both proposals (414 and 409) were fully approved on-chain, so execution of them is expected.
414 not being executed is simply not expected, only consequence of a pretty edge situation of proposals’ interdependency, schedule to be enacted almost simultaneously.
We have reviewed both proposals, and we don’t see any technical risk on 414 execution, being simply a migration of Collector funds (to the Collector itself) from Aave v2 Polygon to Aave v3.