[ARFC] wMATIC Risk Parameter Update Polygon v3

title: [ARFC] wMATIC Risk Parameter Update Polygon v3
author: @TokenLogic - @MatthewGraham & @defijesus
created: 2023-04-15


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.


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.


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.


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%


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 and related rights waived via CC0.

Hi @ChaosLabs, @Gauntlet,

Just bringing this post to your attention. The 5 days community discussion phases of the process is coming to end and TokenLogic would like to more to Snapshot shortly.

TokenLogic is more than happy to incorporate feedback, even if it means implementing this proposal over several AIPs.

Do note, there are other like proposals in the works to help facilitate the migration of liquidity from v2 to v3.

Thanks @TokenLogic for this post.
Chaos Labs does not support the proposed parameters above, as we view the change as too aggressive for a single parameter update. Our approach would be to gradually increase the parameters after utilizing our simulation engine and analyzing the effects of each individual change.

We plan to publish our parameter updates recommendations for polygon shortly, which include an increase of the LT and LTV of wMATIC, which will improve the capital efficiency compared to V2.


Thank you for your proposal, @TokenLogic. Gauntlet’s simulation analysis suggests that the proposed parameters would increase risk disproportionately to the capital efficiency gains from higher LTV/LT and lower LB. Therefore, we do not support this change at this time.


This is a great proposal and I am highly in favor of it. wMATIC has proven to be an extremely reliable asset since its introduction on Aave v2 (Polygon) in 2021 and the suggested parameters would more accurately reflect the actual risk associated with leveraging wMATIC.