[ARFC] wMATIC Supply Cap Increase

Governance
1

Title: [ARFC] wMATIC Supply Cap Increase
Author: @llamaxyz - DeFi_Consulting(@matthewgraham), @pauljlei (Gauntlet) & @omergoldberg (@chaoslabs)
Created: 2023-02-24

Summary

Llama proposes increasing the wMATIC Supply Cap on Polygon to facilitate to inflow of wMATIC from Balancer Linear Pools and the Polygon Foundation Liquidity Mining campaign.

Abstract

This proposal presents Aave with the opportunity to increase the wMATIC SupplyCap from 47M to 57M units on the Polygon v3 deployment.

Looking forward, the potential inflows from new Balancer liquidity pools and migration of wMATIC from Aave v2 to v3 will exceed the current SupplyCap. Migration of the Balancer Liquidity Pools alone is expected to exceed the current SupplyCap.

An initial 10M SupplyCap increase has been proposed and this figure may be revised ahead of this proposal being submitted to AIP. This proposal has been reviewed from @ChaosLabs and Gauntlet.

Motivation

In the coming weeks, Liquidity Mining on Polygon v3 will expand beyond just MaticX deposits and Balancer will deploy several liquidity pool using bb-a-wMATIC.

The MaticX/wMATIC and stMATIC/wMATIC Balancer Liquidity pools are migrating to MaticX/bb-a-wMATIC and stMATIC/bb-a-wMATIC. An estimated 31.3M units of wMATIC are expected to be deposited into the wMATIC reserve on Polygon v3. This is expected to occur during March/April.

The utilisation of the wMATIC reserve is 42% with 19.75M of 47.00M units deposited. An inflow of 31.3M units from bb-a-wMATIC would exceed the current SupplyCap.

With Liquidity Mining about to expand on Polygon v3, it is reasonable to expect some of the 20.47M units of wMATIC deposited in v2 to migrate to v3. There is also potential new wMATIC deposits due to the Liquidity Mining rewards being distributed.

The current SupplyCap is insufficient to accomodate the potential inflows of wMATIC into the reserve. As a result, this proposal seeks to increase the SupplyCap from 47M to 57M units, a 10M increase. The 10M increase may be revised higher closer to the time of AIP being submitted, if required.

Analysis performed by Gauntlet generated a conservative and aggressive SupplyCap ceiling of 18M and 73M units respectively.

Chaos Lab’s supports an initial increase of 10M units when utilisation begins to increase and follow up proposal to iteratively increase the SupplyCap to accommodate deposits.

@llamaxyz proposes increasing the SupplyCap by 10M to 57M.

This proposal will go direct to AIP and be executed prior to the Balancer pools receiving BAL emissions. However, if Liquidity Mining leads to significant wMATIC inflows, the proposed SupplyCap will be increased to accommodate the Balancer deposits.

This proposal is being shared on the forum now to enable discussion prior to submitting the AIP in the coming weeks.

Specification

The following risk parameters are being proposed and have been reviewed by Gauntlet and Chaos Labs.

Ticker: wMATIC

Contract: 0x0d500b1d8e8ef31e21c99d1db9a6444d3adf1270

Parameter Current Value Proposed Value
SupplyCap 47M units 57M units

Copyright

Copyright and related rights waived via CC0.

1 Like
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As mentioned, Gauntlet’s conservative and aggressive SupplyCap calculations are 18M and 73M units, respectively. As such, the community should vote YAE for the proposal only if they have an aggressive (higher) risk preference to favor growth. The Snapshot Vote here shows that the majority of the community have an aggressive risk preference.

1 Like
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Hi Everyone,

A quick update on this proposal.

The following liquidity pools are to be migrated:

stMATIC / wMATIC being migrated to stMATIC / bb-a-wMATIC
MaticX / wMATIC being migrated to MaticX / bb-a-wMATIC

This is expected to lead to around 26,058,510.4 units wMATIC being deposited in Aave v3 on Polygon. The wMATIC utilisation is currently 24.58M units of 47M units. With the expected inflows from the new bb-a-wMATIC linear pools, a total of 50.64M units would be deposited and the overall utilisation would be a little less than the 57M proposed Supply Cap.

With 15.37M units of wMATIC deposited in Aave v2 and Liquidity Mining about to start, the proposed Supply Cap can not accommodate a full Aave v2 to v3 migration plus the bb-a-wMATIC deposits. We may need to revise the proposed Supply Cap higher to accommodate both LM driven and bb-a-wMATIC deposits. A Supply Cap of 66M units would be enough provided the LM does not attract additional deposits or looping strategies. This presents a risk and we are monitoring the market.

A tentative forward schedule is shown below:

  • LM from Lido DAO and Polygon Foundation week commencing 27th March
  • Balancer gauges being deployed on Polygon week commencing 27th March (might slip)
  • Balancer Snapshot vote (soon thereafter)
  • BAL emissions commence (week after prior step)

The above dates are subject to change, but are the best representation of planned events at the time of writing.

2 Likes
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Thanks for sharing this @Llamaxyz.
Following our methodology, we support increasing the supply cap to 66M units.

2 Likes
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Thank you @Llamaxyz and @ChaosLabs for your support. Like @Llamaxyz had mentioned in the post above, the boosted pools would lead to a huge inflow of wMATIC to Aave v3 and the supply cap must be increased to accommodate the same.

1 Like
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Thanks for the proposal - we would love to see the Supply Cap raised to help increase use of Aave on Polygon!

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Thanks a lot team for the proposal - supply cap increase will help more composability and supply on AAVE markets. Leading to more fees for all DeFi.

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Hi Everyone :wave:

A further update on this proposal, I created and submitted the following gauge requests on Balancer DAO governance forum:

These proposals are expected to progress to Balancer’s Snapshot on the 6th April after narrowly missing this weeks vote. BAL incentives are expected to live on 27th April.

Given the duration of implementing a governance proposal via Aave, it would be prudent to have the AIP go live for voting week commencing 10th or 17th April. This gives us a 1-2 week timeline to prepare everything.

The next step here is to confirm the revised Supply Cap figure. I would like to suggest revising the Supply Cap to 66M wMATIC. The below shows how I came to support this figure.

  • Aave v3 wMATIC deposits: 26.38M
  • Aave v2 wMATIC deposits: 15.03M
  • Balancer Linear Pool deposits: 23.02M (80% of wMATIC in current pools)
  • Total: 64.43M

66M units is narrowly higher than the calculated figure above and aligns with the lower bound of the two risk provides suggested maximum value. @Gauntlet 's previous analysis is supportive of 73M units and @ChaosLabs is supportive of 66M units. For ease of progressing through governance, 66M unit Supply Cap will be presented to the community for voting on.

Given the time since the original post was published, could @OriN or @Pauljlei please advise if there ay any concerns with the proposed Supply Cap increase.

2 Likes
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We still support the supply cap increase to 66M units

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Hi Everyone :wave:

The payload for the wMATIC Supply Cap increase proposal will be combined with the BAL Borrow Cap increase proposal.

@Llamaxyz expects to have the proposal with @bgdlabs for review later today.

1 Like
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Gauntlet still supports the supply cap increase of wMATIC to 66M.

2 Likes