November-December 2022
Overview
Chaos Labs is happy to share our first community update. In this update, we will highlight the past month’s activities and proposals and share our planned work moving forward.
Highlights
- Began our official engagement on November 7th, 2022 - the full scope of the engagement can be found here.
- Hosted our first community call, where we introduced the Chaos team, discussed our roadmap for the coming months (read here for more details), and showed a sneak peek at the Chaos Parameter Recommendation Platform.
- Proposed AIP-125 with @Llamaxyz to allow users to deposit assets across several reserves following the CRV attack and initial freezing of the markets.
- Published four more proposals (list below) across v2 and v3 deployments for risk parameter updates, including - supply and borrow caps, disabling borrows, unfreezing assets, and amending liquidation thresholds and LTVs.
- Published several analyses and methodologies to support community discussion and decision making including:
What’s Next
In the coming month, the Chaos team will be focused on a few areas:
- Ongoing and proactive risk management in v2 and v3 markets
- Supporting the deployment of v3 Ethereum
- Initial risk parameter recommendations for the assets to be deployed on the network. We are working closely with the BGD team and other protocol contributors and shared our initial methodology and recommendations with the community. In the coming weeks, the community will decide on the initial assets and risk parameters for the deployment launch.
- Discussion and research on risk analysis regarding the upcoming GHO launch - more on this to come over the coming weeks.
- Parameter Recommendation Dashboard - we are in the final stages of work on all fronts (data, infra, UI) with planned delivery in 3-4 weeks.
- We put forward a proposal to formally cover v2 markets and include proactive risk analysis and management while encouraging and supporting a safe migration to the upcoming Ethereum v3 deployment - the full details can be found here. After passing the initial Snapshot, we will formally post an AIP the first week of January.
We thank the community for the support, feedback, and involvement over this past eventful month. We invite the community to reach out with any question, feature request, or any other concern!
11 Likes
January 2023
Overview
In this update, we highlight the past month’s activities and proposals and share our planned work moving forward.
Highlights
- Following a detailed community discussion around the launch of Ethereum V3, our proposal for initial onboarded assets was chosen by the community. We are super excited about the launch of V3 on Ethereum and looking forward to continuously amending risk parameters and adding new assets to the deployment.
- Suggested a framework for collaboration between Aave risk managers. This framework aims to create clarity for the Aave community around risk-related items while maximizing the advantages of multiple risk managers in the protocol.
- The Chaos and Gauntlet (@paulieJ @deepa) teams have been utilizing this framework as a basis for our collaboration. We have set up open communication lines, bi-weekly syncs, and a shared work tracker and are working on providing clear proposals and recommendations for the community.
- The teams collaborated and proposed joint recommendations for the initial parameters of the cbETH and rETH listings to Ethereum V3.
- Published a community framework for recommending risk parameters for new asset listings.
- Supported @llama on the CRV Interest Rate Curve Upgrade proposal, utilizing our supply and borrow cap methodologies to recommend updated caps for CRV on Polygon V3.
- Provided analysis and recommendation for a supply cap for AAVE on Optimism V3. The community decided to move forward with Gauntlet’s proposal to reduce immediate tail risk, which is planned to be followed by a more comprehensive community discussion around methodology assumptions and community risk appetite.
- Our proposal to formally cover V2 markets and include proactive risk analysis and management while encouraging and supporting a safe migration to the upcoming Ethereum V3 deployment was approved by the community. We thank the community for this vote of confidence in Chaos Labs.
What’s Next
In the coming month, the Chaos team will focus on the following few areas:
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Optimization of risk parameters following the launch of our V3 Monte Carlo simulation framework
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V2 → V3 transition:
- Methodically amending asset parameters to incentivize new users to migrate accounts to V3.
- Helping analyze incentive (both treasury- and parameter-managed) schemes to incite account transitions.
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Analysis and parameter recommendations for new assets and markets:
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wstETH (V3 Arbitrum), sfrxETH (V3 Ethereum), LUSD (V3 Ethereum) - working on providing risk parameter recommendations for the said assets.
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Metis and Celo networks - working on providing recommendations on the initial list of assets and parameter configurations to allow a final Snapshot to approve the deployment.
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Discussion and research on risk analysis regarding the upcoming GHO launch
1 Like
February 2023
Overview
In this update, we highlight the past month’s activities and proposals and share our planned work moving forward.
Highlights
- We launched the Chaos Labs Parameter Recommendation Platform, making it easier for users to identify the tradeoffs between risk parameters. This platform will further contribute to a better understanding and transparency of the parameter recommendation process. We invite the community to read our full in-depth blog post and portal run-through here.
- Added support for Ethereum V3 into the Chaos Risk Dashboard.
- Published our Updated Supply and Borrow Cap Methodology. We are in the process of formalizing a more robust supply and borrow cap methodology to serve the future needs of Aave V3, which we will complete in the coming weeks.
- Published seven proposals (list below) across V2 and V3 deployments for risk parameter updates, including - LT, LTV, LP, and Supply/Borrow Caps:
- Proposals approved by governance:
- Proposals still in the Governance process:
- Provided analysis and supported the following proposals:
What’s Next
In the coming month, the Chaos team will focus on the following few areas:
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Continuous optimization of risk parameters on V3 deployments
- Integrate and add support for V3 Optimism and Polygon into the Chaos Labs Parameter Recommendation Platform.
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Discussion and research on risk analysis regarding the upcoming GHO launch.
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Analysis and parameter recommendations for new assets and markets.
Current WIP:
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UNI (V3 Ethereum), SNX (V3 Ethereum), YFI (V3 Ethereum), MKR (V3 Ethereum), and LDO (V3 Ethereum)- working on providing risk parameter recommendations for the said assets.
- Analysis for adding cbETH to Ethereum-correlated E-Mode.
1 Like
March 2023
Overview
This update highlights the past month’s activities and proposals and shares our planned work.
Highlights
- USDC depeg - following the USDC depeg, the Chaos team started a “war room” to monitor and analyze the markets while providing community recommendations to mitigate risk. The summary of events can be found in our blog post.
- We published our evaluation of the stablecoin e-Mode category. In this analysis, we examined several alternatives to mitigating future shortfalls due to stablecoin depegs while examining their impact on risk and protocol reward.
- GHO
- Provided our analysis and recommendations for the GHO genesis parameters, including bucket capacity, borrowing rates, and target DEX liquidity figures.
- Launched the GHO Risk Monitoring Dashboard. This new dashboard, currently supporting the Goerli test net version of GHO, provides real-time monitoring of the stablecoin and allows users and developers to dive deep into GHO data and usage. For more details and product run-through, please read our dedicated blog post.
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We published our E-Mode Methodology. In the methodology, we analyze two key properties as a requirement for E-mode assets: Pairwise prices must (1) be historically mean reverting and (2) they must mean-revert fast. The full paper can be found here.
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Published our Isolation Mode Methodology. We have adopted a stress-testing
framework to recommend debt ceilings for isolated assets and utilize this methodology in our recommendations for new asset listings. The full paper can be found here.
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We provided our recommendations on the V2 → V3 migration process. Chaos views this as an iterative process while evaluating individual use cases and taking appropriate actions accordingly. The full post can be found here.
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Eight proposals were published (listed below) across V2 and V3 deployments for risk parameter updates and risk mitigation.
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Provided analysis and supported the following proposals:
What’s Next
In the coming month, the Chaos team will focus on the following few areas:
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Community plan for V2 → V3 migration is based on the principles laid here
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Continuous optimization of risk parameters on V3 deployments
- Integrate and support V3 Polygon into the Chaos Labs Parameter Recommendation Platform.
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New features on the Chaos Risk Monitoring Platform to improve community engagement.
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Analysis and parameter recommendations for new assets and markets.
Current WIP:
April 2023
Overview
This update highlights the past month’s activities and proposals and shares our planned work.
Highlights
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We published our new Supply Cap Methodology. In this iteration of our methodology, we introduce a new stress-testing framework for setting the supply cap for each token, leveraging the Chaos Labs simulation platform. To find the optimal supply caps, we stress-test each token against appropriate stress scenarios based on historical data to measure the potential accrual of bad debt in these situations.
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Published the Chaos Labs - LSD Methodology Update. In this post, we walk through our framework for establishing risk parameters for Liquid Staking Derivatives, taking into account redeemability mechanisms, Oracle composition, liquidity, counterparty risk, and more.
- Initiated a community vote to gauge the community’s preference with respect to limiting the supply caps for LSDs, which will be considered in future supply cap recommendations.
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Following the community vote on V3 migration lever preferences, we prepared a comprehensive set of recommendations aimed at facilitating a seamless and successful migration from Aave V2 to V3 on Ethereum. This will be a multi-phased process that will include the completion of asset listing on V3 alongside parameter updates across V2 and V3 assets to promote migration. The full post can be found here.
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Added support for Polygon on the Chaos Labs Parameter Recommendation Platform. The platform now supports Avalanche, Arbitrum, Optimism, and Polygon, with Ethereum to follow shortly.
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Three proposals were published (listed below) for risk parameter updates and mitigation.
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Provided analysis and supported the following proposals:
What’s Next
In the coming month, the Chaos team will focus on the following few areas:
- Publish Chaos Labs’ IR Curves methodology
- Community plan for V2 → V3 migration as described here
- Continuous optimization of risk parameters on V3 deployments
- Integrate and support V3 Ethereum into the Chaos Labs Parameter Recommendation Platform.
- Adding features and improvements to the Chaos Risk Monitoring Platform to improve community engagement.
- Analysis and parameter recommendations for new assets and markets.
1 Like
May 2023
Overview
This update highlights the past month’s activities and proposals and shares our planned work.
Highlights
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We launched the Chaos Labs Asset Listing Portal, a tool built into the Chaos Labs Parameter Recommendation Platform to support the onboarding of new assets to the Aave protocol. The Asset Listing Portal is designed to help streamline community decision-making by presenting key metrics about the considered assets, such as volatility, exchange liquidity, market cap, on-chain activity, and the initial risk parameter recommendations for the considered assets by Chaos Labs. A walkthrough of the portal and its features can be found here.
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Added support for Ethereum on the Chaos Labs Parameter Recommendation Platform. The platform now supports Avalanche, Arbitrum, Optimism, and Polygon, and Ethereum, with Metis to follow next.
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Following the Chaos Labs - LSD Methodology Update, we provided our recommendations for updating the pricing of LSDs to use primary exchange rates, which alongside BGD’s Generalized price sync solution, could allow for more aggressive risk parameter settings. The full details on this coming change can be found on the BGD Operational oracles update.
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Three proposals were published (listed below) for risk parameter updates and new asset listings as part of the efforts for V2 → V3 migration.
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Provided analysis and supported the following proposals:
What’s Next
In the coming month, the Chaos team will focus on the following few areas:
- Publish Chaos Labs’ IR Curves methodology
- Community plan for V2 → V3 migration as described here
- Continuous optimization of risk parameters on V3 deployments
- Integrate and support V3 Ethereum into the Chaos Labs Parameter Recommendation Platform.
- Adding support for Polygon and Avalanche V2 on the Chaos Risk Monitoring Platform to improve community engagement.
- Analysis and parameter recommendations for new assets and markets.
2 Likes
June 2023
Overview
This update highlights the past month’s activities and proposals and shares our planned work.
Highlights
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Following a community discussion around the CRV market on Aave V2, Chaos proposed an alternative strategy to freezing the market. Following the community discussion, we put forward a series of proactive proposals to reduce exposure on v2 and further encourage users to migrate positions to v3:
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Over the weekend of June 10th, the markets experienced significant turbulence following the SEC filings against Binance and Coinbase. The Chaos team was closely monitoring the markets to prepare risk-mitigating strategies for various developments. During this time, the protocol encountered orderly liquidations and did not necessitate any immediate or additional actions.
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We are constantly iterating and improving the Chaos Risk Monitoring Platform and have added support for Polygon and Avalanche V2 data and analytics. In addition, we have added support for Metis on the Chaos Labs Parameter Recommendation Platform. The platform now supports all Aave V3 deployments.
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We published the following proposals for risk parameter updates and new asset listings as part of the efforts for V2 → V3 migration.
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Provided analysis and supported the following proposals:
What’s Next
In the coming month, the Chaos team will focus on the following few areas:
- Continuation of the community plan for V2 → V3 migration as described here
- Additional V2 risk parameter updates to gradually reduce capital efficiency across V2 collateral assets.
- Continuous optimization of risk parameters on V3 deployments.
- Analysis and parameter recommendations for new assets and markets.
2 Likes
July 2023
Overview
This update highlights the past month’s activities and proposals and shares our planned work.
Highlights
- On the weekend of July 22nd, the MAI token underwent considerable fluctuations, with the price dropping to a low of nearly $0.91. Even though we didn’t recommend immediate actions, we proposed a measure to curtail the exposure on Aave while the market continues to evolve. This suggestion entailed drastically reducing supply and borrow caps as well as debt ceilings across all applicable deployments (Avalanche, Optimism, Arbitrum, Polygon).
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Following the community discussion around the CRV market on Aave V2 in June, Chaos proposed an alternative strategy to freezing the market. Chaos has since put forward and executed 2 proposals to decrease LT and LTV for CRV on V2 Ethereum, with the community opting for a more aggressive reduction of these parameters in the most recent iteration.
- Update: This proposal was canceled following the Vyper exploit and CRV price volatility.
- Chaos Labs is continuing to evaluate the CRV market on Aave and has provided the following analysis and recommendations.
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We published the following proposals for risk parameter updates and new asset listings as part of the efforts for V2 → V3 migration.
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Provided analysis and supported the following proposals:
What’s Next
In the coming month, the Chaos team will focus on the following few areas:
- GHO - following the launch of GHO and initial discussion surrounding the GSM, GHO Steward, Liquidity Pools, and more, we are prepared to support the community on all GHO-related initiatives.
- Continuation of the community plan for V2 → V3 migration as described here
- Continuation of the V2 risk parameter updates to gradually reduce capital efficiency across V2 collateral assets.
- Continuous optimization of risk parameters on V3 deployments.
- Analysis and parameter recommendations for new assets and markets.
2 Likes
August 2023
Overview
This update highlights the past month’s activities and proposals and shares our planned work.
Highlights
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Following the Vyper Exploit and the ongoing discussions concerning the CRV market on v2 Ethereum, we continued to push the deprecation of the CRV market on V2 via a series of LT reductions. The deprecation plan approved by the community can be found here. In the days following the Vyper exploit, we published AIP-292 to reduce CRV LT by an additional 6% and AIP-293 to disable CRV borrowing on V3.
- Over the past month, the top account has repaid over 50M USDT and redeemed nearly 200M CRV as we continue to wind down the market.
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We launched the latest version of our Risk Portal, unifying the Chaos Labs Risk Hub, Asset Listing Portal, and Recommendation Portal into a single user interface. This unified platform simplifies the process of accessing recommendations along with supporting data and pertinent risk monitoring and alerting. Read more on our dedicated blog post, including a full product run-through here.
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We supported the recent launch of Base with initial parameter recommendations and integration of the deployment to our Risk Portal post-launch. As usage on Base grows, we will continue supporting with parameter optimization, supply and borrow cap recommendations, and new asset listings.
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The community has approved [ARFC] - Chaos Labs Scope and Compensation Amendment, to formally expand our scope of work to cover all of Aave, including V2 and GHO. We thank the community for this vote of confidence in Chaos Labs!
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We published the following proposals for risk parameter updates and new asset listings:
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Provided analysis and supported the following proposals:
What’s Next
In the coming month, the Chaos team will focus on the following few areas:
- GHO - Following the launch of GHO and initial discussion surrounding the GSM, GHO Steward, Liquidity Pools, and more, we are prepared to support the community on all GHO-related initiatives.
- Continuation of the community plan for V2 → V3 migration as described here
- Continuation of the V2 risk parameter updates to gradually reduce capital efficiency across V2 collateral assets. The AIP for the most recent proposal will be published shortly
- Continuous optimization of risk parameters on V3 deployments.
- Analysis and parameter recommendations for new assets and markets.
3 Likes
September 2023
Overview
This update highlights the past month’s activities and proposals and shares our planned work.
Highlights
- Aave V2 Markets Depreciation Plan - As part of our ongoing efforts to wind down V2 markets and promote migration to V3, Chaos Labs and Gauntlet have collaborated on a structured plan designed to progressively reduce the activity in the frozen markets by implementing a series of LT reductions. This will be done on a bi-weekly basis, where the parties will post a joint recommendation utilizing the direct-to-AIP framework.
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Chaos Labs’ CRV V2 Ethereum Deprecation Plan - On September 25th, 2023, account 0x7a16ff8270133f063aab6c9977183d9e72835428 fully repaid their loan and redeemed their entire CRV position. With this, the CRV market on Aave V2 Ethereum is now in a healthy state, with the market boasting ample on-chain liquidity to facilitate liquidations even in the face of substantial price volatility. Moving forward, to reduce governance overhead, we intend to include recommendations for further CRV LT reductions within the broader Aave V2 markets deprecation plan described above.
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We published the following proposals for risk parameter updates and new asset listings:
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Provided analysis and supported the following proposals:
What’s Next
In the coming month, the Chaos team will focus on the following areas:
- GHO - Following the launch of GHO and initial discussion surrounding the GSM, GHO Steward, Liquidity Pools, and more, we are prepared to support the community on all GHO-related initiatives.
- Continuation of the V2 risk parameter updates to gradually reduce capital efficiency across V2 collateral assets.
- Continuous optimization of risk parameters on V3 deployments.
- Analysis and parameter recommendations for new assets and markets.
October 2023
Overview
This update highlights the past month’s activities and proposals and shares our planned work.
Highlights
What’s Next
We are excited to share our renewal proposal and look forward to continuing to serve the DAO in the coming year. The proposal focuses on our comprehensive risk management and optimization platform and services for Aave, covering the entire spectrum of Aave, including V2, V3, and GHO, across all current and future deployments.
In the coming months, the Chaos team will continue its focus on the following areas:
- GHO
- 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.
- Analysis and parameter recommendations for new assets and markets.
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November 2023
Overview
This update highlights the past month’s activities and proposals.
Highlights
- KNC Exploit - Following the exploit on the KyberSwap DEX on November 22nd, we conducted a comprehensive analysis to assess its impact on Aave. In our evaluation, we emphasized that the incident did not introduce significant risk to the protocol. This was primarily due to the conservative parameters set for the asset and its limited usage on the protocol. As a precautionary measure to safeguard the protocol against unforeseen developments, we recommended a temporary freeze. However, as the price of KNC stabilized and considering its conservative parameter settings, we ultimately decided not to proceed with an AIP.
- Grace Sentinel Authorization - following the security threat reported on November 4th, which led to the pausing of several V2 and V3 pools by the Aave Guardian, we collaborated with other community members on the plan of reactivating the affected pools. Together with Gauntlet, we provided final recommendations to the Aave Guardian on activating the Liquidations Grace Sentinel, a newly developed mechanism with the primary objective of safeguarding users who were unable to refill or repay their positions during the pause, protecting them from liquidation upon the resumption of normal protocol operations.
- We supported the recent launch of Gnosis Chain with initial parameter recommendations and its integration into our Risk Portal post-launch. As usage on the deployment continues to grow we are prepared to support with parameter optimization, supply and borrow cap recommendations, and new asset listings.
- Chaos’ renewal proposal has passed with unanimous support. We are truly grateful for this vote of confidence and are deeply committed to our ongoing collaboration with the community. We look forward to continuing our hard work in securing Aave and maintaining the protocol’s position as market leader.
What’s Next
In the coming months, the Chaos team will continue its focus on the following areas:
- GHO
- 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.
- Analysis and parameter recommendations for new assets and markets.
1 Like
