[ARFC] wstETH Supply Cap Increase on Ethereum V3

Summary

This proposal aims to increase the wstETH Supply Cap on Ethereum V3 to support market growth.

Motivation

As seen in our dashboard, over the past month, wstETH supply cap utilization has increased from 67% to 79% in Ethereum v3, with the current cap at 1.1M wstETH (worth $3.16B).

wstETH Supply Cap Utilization Time Series

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Despite the high utilization, there’s still room for an additional $663M of wstETH to be supplied. The current largest wstETH supplier in v3 Ethereum supplies $665M. Therefore, the current cap is likely not inhibiting growth.

However, to ensure ample capacity for future suppliers and to encourage LST growth on Aave, we propose raising the supply cap from 1.1M to 1.25M. This adjustment would lower the supply cap utilization from 79% to 70%.

Per our supply cap methodology our recommendation of 1.25M is supported by the current 3M wstETH circulating supply.

Specification

Increase the supply cap for wstETH on Ethereum V3 to the following.

Parameter Current Value Proposed Value
Supply Cap 1.1M 1.25M

Next Steps

Once we receive feedback from @ChaosLabs on the above recommendations, we will move forward with Risk Steward actions.

Disclaimer

Gauntlet has not received any compensation from any third-party in exchange for recommending any of the actions contained in this proposal.

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.

Copyright

Copyright and related rights waived via CC0.

4 Likes

Considering the existing cap and usage, which permits an additional supply of 230.84k wstETH (~$666M), there’s ample space for more wstETH supply without the risk of hindering growth. Therefore, we currently see no immediate need to raise the cap.

Over the last 90 days, the total supply of wstETH has increased by about 170 units. In the event of a sudden surge in demand, we are prepared to move quickly with an additional cap increase.

5 Likes

After observing an additional increase of over 69k wstETH supplied over the past week, bringing the supply cap utilization to 85%, we support increasing the caps as per the recommendation above.

1 Like

We will use the Risk Steward to increase the cap. We also note that the proposal to increase wstETH LT/LTV parameters was executed on 1/31/24 and therefore anticipate higher demand than existed over the previous 90 days.

1 Like

Risk steward transaction for the above cap recommendation has been submitted

1 Like

The transaction above was successfully executed.

2 Likes