Chaos Labs - Monthly Community Update

[ChaosLabs]

December 2023

Overview

This update highlights the past month’s activities and proposals.

Highlights

• Stablecoin IR Updates - we put forward a proposal to increase the stablecoin interest rate parameters across all Aave deployments. Despite recent adjustments under AIP-375, there’s continued volatility in borrow rates. An analysis of the Ethereum V3 platform shows a significant increase in both the supply and borrowing of stablecoins like USDC, USDT, and DAI, indicating that the market positively received these changes. However, the utilization rates post-AIP-375 show that the increase did not stabilize utilization as expected, highlighting the need for further adjustments. The proposal recommends increasing the Slope1 parameter to 6% for stablecoins across all Aave deployments to achieve a more stable and predictable borrowing rate, with a focus on maintaining equilibrium utilization under the UOptimal point.

• As part of our ongoing initiative to phase out V2 markets, we’ve put forward an additional proposal, in collaboration with Gauntlet, to lower Liquidation Thresholds for frozen assets on V2 Ethereum and Polygon. Following the implementation of AIP-404, several assets on Aave V2 now have their liquidation thresholds set close to zero, effectively removing their functionality as collateral. These assets include CVX, DPI, ENJ, MANA, REN, SNX, and YFI on Ethereum, and SUSHI, DPI, BAL, CRV, GHST, and LINK on Polygon.

• We published the following proposals for risk parameter updates:

  • [ARFC] - Chaos Labs Risk Stewards - Increase Supply Caps on V3 Ethereum, Arbitrum and Optimism - 12.26.2023
  • [ARFC]Risk Stewards - Increase Supply Cap for USDC.e on V3 Polygon
  • [ARFC] - Chaos Labs Risk Stewards - Increase Supply Caps on V3 Gnosis - 12.15.2023
  • [ARFC] Chaos Labs - Stablecoin IR Curves Updates
  • [ARFC] Chaos Labs Risk Parameter Updates - WBTC.e on V2 and V3 Avalanche
  • [ARFC] V2 Ethereum and Polygon LT Reductions - 12.04.2023

• Provided analysis and supported the following proposals:

  • [ARFC] Gauntlet Supply and Borrow Cap Recommendations 2023-12-27
  • [ARFC] Gauntlet’s Borrow Cap Recommendation - Optimism Aave v3 - 2023-12-29
  • [ARFC] Gauntlet’s Cap Recommendations - Aave v3 Metis - 2023-12-28
  • [ARFC] Harmonize USDT Risk Parameters on Aave V3 Markets
  • [ARFC] Increase Supply and Borrow Caps at 100% Utilization December 2023