[ARFC] wMATIC Supply & Borrow Cap Increase Polygon v3

Governance
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title: [ARFC] wMATIC Supply & Borrow Cap Increase Polygon v3 2023.06.01
shortDescription: Increase Supply & Borrow Cap wMATIC on Polygon v3
author: @Llamaxyz - @TokenLogic
created: 2023-06-01

Summary

This AIP proposes increasing the wMATIC Supply and Borrow Cap on Polygon v3.

Abstract

With strong deposit flows the utilisation of the Supply and Borrow Cap is 78.10% and 74.92% respectively. This publication seeks to increase both Supply and Borrow to facilitate continued deposits from bb-a-wMATIC linear pools and migration from v2 to v3 on Polygon.

Motivation

As several Balancer liquidity pools migrating to pools that include bb-a-wMATIC, Aave will continue to see increased wMATIC deposits over time.

Currently, there is around 3,934,269 and 810,141 units of wMATIC not yet migrated to the new gauges. The vast majority of this wMATIC when migrated will be deposited into Aave v3.

There is also 15.19M units of wMATIC on Aave v2 that has not yet migrated to v3.

Collectively, this represents around 19.93M units of wMATIC. There is currently 11.90M units of Supply Cap capacity. This proposal seeks to increase the Supply Cap by 15.00M units to facilitate continue deposits for bb-a-wMATIC pools.

If the Risk Service Providers are aligned on supporting a higher Supply Cap then we are more than happy for the Risk Stewards to implement this aspect of the proposal.

With raising the Supply Cap of MaticX and stMATIC being considered, this publication seeks to increase the Borrow Cap of wMATIC enabling the continued growth of everage strategies on Aave. A conversvative loop strategy has around 6x leverage and implies 6 units of wMATIC are borrowed for each unit of LST collateral.

With 12.45M units of Borrow Cap capacity, just over 2M units of LST looped 6 times would fill the Borrow Cap spare capacity. This publication proposes increasing the Borrow Cap to 67M units, an increase of 16M units.

With many teams are offering yield maximising strategies, there is continued strong demand for borrowing wMATIC. The current Borrow Cap has reached 74.92% utilisation. The newly proposed Borrow Cap 67M units is equivalent to 34% increase and represents 74.50% of the current Supply Cap. The Uoptimal parameter for the wMATIC reserve is 75%.

With reference to the new ARFC Aave V3 Caps update Framework it is possible to ship several upgrades to gradually increasing Aave’s exposure to wMATIC over time.

Specification

The following risk parameters have been proposed by Llama and Chaos Labs has expressed support on the governance forum.

Ticker: wMATIC

Contract: polygon: 0x0d500b1d8e8ef31e21c99d1db9a6444d3adf1270

Parameter Current Value Proposed Value
SupplyCap 90.00M units 105.00M units
BorrowCap 50.00M units 67.00M units

Copyright

Copyright and related rights waived via CC0.

4 Likes
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We support the proposed increases for supply and borrow caps following our methodology and our previous analysis here.

In addition to the above proposal, and following the feedback from @sakulstra here, we plan to incorporate the supply cap increases for both wstETH and stMATIC, as there is alignment between the risk providers.

Once we receive feedback from @Gauntlet on the above recommendations, we will be able to move forward to implement these updates via the Risk Steward process.

Recommendations:

Network Asset Current Supply Cap Recommendation Current Borrow Cap Recommendation
Polygon wMATIC 90,000,000 105,000,000 50,000,000 67,000,000
Polygon wstETH 2,500 2,700 285 No Change
Polygon stMATIC 30,000,000 32,000,000 N/A N/A
2 Likes
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Hi Everyone :wave:

We have been in touch with Gauntlet and we can expect to learn the results of Gauntlets analysis on Tuesday 6th July, in line with the 3 business day turnaround rule of thumb turnaround time.

stMATIC at 32,000,000 units, that should be something that can be implemented by the Risk Stewards now.

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As we wait for the @Gauntlet analysis for wMATIC, Chaos Labs has created the transaction to increase the following caps, for which the risk managers have reached consensus on, for immediate execution:

Network Asset Current Supply Cap Recommendation Current Borrow Cap Recommendation
Polygon wstETH 2,500 2,700 285 No Change
Polygon stMATIC 30,000,000 32,000,000 N/A N/A

The transaction status can be found here - https://app.safe.global/transactions/queue?safe=matic:0x2C40FB1ACe63084fc0bB95F83C31B5854C6C4cB5

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These updates have been implemented by the Risk Steward.

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Gauntlet’s supply and borrow cap methodology implies a supply cap up to 50% of wMATIC’s ADV. This is greater than 105,000,000, so we support the increase. We also support raising the borrow cap to 67,000,000, as our methodology implies setting the borrow cap equal to the supply cap.

1 Like
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Hi @Gauntlet and @ChaosLabs,

As we are aligned, can we please implement this Supply Cap change via the Risk Steward role.

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We’ve prepared the payload to be executed via the Risk Steward process for this proposal.

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The update to borrow and supply cap for WMATIC has been executed via Risk Steward.

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