Chaos Labs - Monthly Community Update

Governance
19

July 2024

This update highlights Chaos Labs’ activities and proposals in July.

Highlights

Stablecoin Interest Rate Adjustments

As part of our regular monitoring of rates, and amidst an alteration to MakerDAO’s Dai Savings Rate, we proposed changes to Aave’s stablecoin rates to ensure they remained competitive. This involved lowering Slope1 from 9% to 6.5% for most stablecoins.

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Deploy an Etherfi Aave V3 Instance

We responded to a forum post proposing the creation of a new Aave deployment containing weETH, USDC, and GHO, intended to facilitate borrowing of stablecoins with weETH. We provided a detailed response to the various considerations for this novel market, including disabling USDC as collateral to ensure that users were not gaming rewards by engaging in USDC-USDC looping, as well as disabling weETH borrows so as to not allow weETH-weETH looping.

Rapid weETH and Scroll Cap Increases

We continued to facilitate growth of the Scroll deployment as well as weETH markets. However, the protocol faced liquidity constraints — primarily in the amount of borrowable WETH — that led us to carefully consider and slow the growth of weETH. This was done to prevent WETH borrow rates from spiking, making leveraged yield strategies unprofitable. Additionally, we observed the Scroll market slowing, combined with wstETH reaching 75% of its on-chain supply, limiting our ability to recommend additional cap increases.

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What’s Next

In the coming months, the Chaos team will continue its focus on the following areas:

  • GHO: ongoing recommendations, including updating parameters for GHO on Arbitrum.
  • Continuation of the V2 risk parameter updates to gradually reduce capital efficiency across V2 collateral assets.
  • Continuous optimization of risk parameters on all V3 deployments.
  • Further updates on the development of Chaos Labs Risk Oracles.
  • Analysis and parameter recommendations for new assets and markets.
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