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!
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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
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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.
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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.
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