title: [ARFC] wMATIC Risk Parameter Update Polygon v3
author: @TokenLogic - @MatthewGraham & @defijesus
created: 2023-04-15
Summary
This publication presents the community with the opportunity to revised wMATIC risk parameters on Aave Polygon v3 to encourage users to migrate from v2 to v3.
Abstract
There is $28.61M and $14.87M of wMATIC deposited into Aave v3 and v2 earning 2.87% and 0.73% respectively. This publication intends to support the migration of user funds from v2 to v3 by improving the capital efficiency of the v3 wMATIC Reserve.
By increasing the TVL and TL parameters, users benefit from improved the capital efficiency by being able to borrow more whilst using the same collateral position.
Motivation
To support the migration of funds from v2 to v3, this proposal seeks to encourage users to deposit wMATIC collateral on v3. This is to be achieved by increaseing the capital effiency, by increasing the LTV and LT on v3 relative to v2. This is expected to encourage the migration of $14.87M wMATIC deposited in v2 to v3.
In the past community members have shown a desire to increase the LTV ratio of wMATIC on v3, see here. As noted in the linked proposal, other communities offer higher LTV and LT paramters. Those equivalent parameters are shown below.
0vix offers 75% LTV
MAI Finance 83.33% LTV
Using Chaos Labs Risk Dashboard, it shows how the top wMATIC deposit positions on v3 are being used. Across the top 8 wallets, the vast majority are borrowing stable coins. Increasing the LTV and LT will benefit these users as there Health Factor will improve. This upgrade encourages users implementing this strategy on v2 to migrate to v3.
Although users receive a higher wMATIC deposit rates on v3, there is also higher USDC, DAI and USDT borrowing costs that partially offset the additional deposit yield. The net yield differential still favours v3 relative to v2. Implementing the changes proposed will provide further incentive for users to migrate.
The risk paramters presented within this proposal match those of wETH on Polygon. @tokenlogic welcomes input from Choas Labs and Gauntlet.
Specification
The below table shows the current and proposed changes to the wMATIC Reserve.
| Risk Parameter | Current Value | Proposed Value |
|---|---|---|
| Loan To Value | 65.00% | 75.00% |
| Liquidation Threshold | 70.00 | 80.00% |
| Liquidation Bonus | 10.00% | 5.00% |
Disclaimer
TokenLogic is not associated with or compensated by Polygon or the Polygon Foundation for publishing this AFRC. The author, TokenLogic, is only paid by Aave DAO via Butter as part of the Incentivised Delegate Campaign.
Contributors of TokenLogic do hold small amounts of wMATIC for gas on the Polygon network,sub $10,000 at time of writing.
Copyright
Copyright and related rights waived via CC0.