Chaos Labs - Monthly Community Update

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

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:

  • Optimization of risk parameters following the launch of our V3 Monte Carlo simulation framework

  • 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.
  • Analysis and parameter recommendations for new assets and markets:

    • wstETH (V3 Arbitrum), sfrxETH (V3 Ethereum), LUSD (V3 Ethereum) - working on providing risk parameter recommendations for the said assets.
    • 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.
  • 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

What’s Next

In the coming month, the Chaos team will focus on the following few areas:

  • Continuous optimization of risk parameters on V3 deployments

    • Integrate and add support for V3 Optimism and Polygon into the Chaos Labs Parameter Recommendation Platform.
  • Discussion and research on risk analysis regarding the upcoming GHO launch.

  • Analysis and parameter recommendations for new assets and markets.

    Current WIP:

    • 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.

What’s Next

In the coming month, the Chaos team will focus on the following few areas:

April 2023

Overview

This update highlights the past month’s activities and proposals and shares our planned work.

Highlights

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

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

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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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

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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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.
1 Like

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.

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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

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.

1 Like

January 2024

Overview

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

Highlights

  • AMPL borrow rate reductions - as detailed in the discussion initiated by BGD regarding the issues with AMPL token on V2 Ethereum, we have seen an abnormal exponential deviation within the AMPL market, particularly in the context of aAMPL/total supplied liquidity/vAMPL supply values. Although the exact cause of this shift is still under investigation, it appears linked to the unique aAMPL implementation. Specifically, the scaled total supply of the underlying AMPL in the market, and thus by proxy aAMPL supply, seems to rebase irrespective of the utilization rate, in addition to the high interest rates realized by the aAMPL. While the issue is still being investigated by the AMPL team, we recommended reducing the AMPL borrow rates to mitigate the accelerated growth of aAMPL supply.

  • We’ve significantly enhanced the Chaos Labs GHO Risk Monitoring Portal, transforming it into a centralized hub for all things GHO. This revamped portal is meticulously designed to house all GHO-related data, charts, and analytics under intuitive tabs for Overview, Risk, and Liquidity. It delivers a comprehensive analysis of GHO, showcasing everything from price and market cap to trading volume, the amount borrowed, and a detailed breakdown of collateral assets. With sophisticated charts revealing GHO’s liquidation risks, the major token holders, borrowing trends on Aave, and the on-chain liquidity across diverse DEXes, these upgrades elevate the portal’s capacity to offer profound insights into the market dynamics, risk assessments, and liquidity scenarios of GHO.

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  • We supported the recent launch of BNB 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.

What’s Next

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

  • Correlated-asset price oracle - provide initial parameter recommendations
  • 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.