# Chaos Labs Risk Stewards - Adjust Supply and Borrow Caps on Aave V3 - 07.21.25

**URL:** <https://governance.aave.com/t/chaos-labs-risk-stewards-adjust-supply-and-borrow-caps-on-aave-v3-07-21-25/22642>\
**Category:** Governance\
**Created:** [July 21, 2025, 7:21pm UTC](https://governance.aave.com/t/chaos-labs-risk-stewards-adjust-supply-and-borrow-caps-on-aave-v3-07-21-25/22642 "2025-07-21T19:21:32Z")\
**Posts on this page:** 3\
**Page:** 1

<div class="post-metadata">

**Author:** ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)\
**Post date:** [July 21, 2025, 7:21pm UTC](https://governance.aave.com/t/chaos-labs-risk-stewards-adjust-supply-and-borrow-caps-on-aave-v3-07-21-25/22642/1 "2025-07-21T19:21:33Z")

</div>

# **Summary**

A proposal to:

- Increase CELO’s supply and borrow caps on the Celo instance.
- Increase USDT’s supply cap on the Celo instance.
- Increase USDC’s borrow cap on the BNB Chain instance.
- Decrease wstETH’s supply and borrow caps on the BNB Chain Instance.

All cap increases are backed by [Chaos Labs’ risk simulations](https://cdn.sanity.io/files/zmh9mnff/production/130e1060165f7ab0766bb4c70cc2ec41c1d1e458.pdf), which consider user behavior, on-chain liquidity, and price impact, ensuring that higher caps do not introduce additional risk to the platform.

## CELO (Celo)

CELO has reached 84% supply cap and 100% borrow cap utilization following new activity in the market.

 ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/c/ce90f370b895606b5a68e79000463899b94cdedc.png)

 ![image (1)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/9d5fa7684166eb757d9c33bc03f240250d9835ef.png)

### Supply Distribution

Supply is not highly concentrated and most of the largest suppliers are not borrowing against their positions.

 ![image (2)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/b/bfcbd28fd2bdaad458415ffb407c2025e484dcd6.png)

The debt ceiling of $500K is just 6% utilized at the moment, creating a low-risk market from a supply-side perspective.

### Borrow Distribution

Borrowing of CELO is limited in USD terms, at just over $33.5K borrowed; this is somewhat concentrated amongst the two largest borrowers, though neither presents a particularly risky profile.

 ![image (3)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/c/c4d1998b0438deef6e211932607e79ad97c7c5e0.png)

### Liquidity

CELO’s liquidity has remained stable over the last few months, with a 2M CELO swap for USDT able to be completed at 10% price slippage.

 ![image (4)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/7/7c42a4045d40a710051c319fc11de5725ecd647d.png)

### Recommendation

Taking into account the low-risk user behavior and the asset’s stable liquidity, we recommend increasing its supply and borrow caps.

## USDT (Celo)

USDT has reached 100% supply cap utilization following new deposits in the market related to ongoing aCELO incentives for supplying.

 ![image (5)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/6/6fde8488bfc2a7591c62f092ce50c01aec258912.png)

 ![image (6)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/7/7592e633d384d0c989f8209f8b6984b6043e3582.png)

### Supply Distribution

Supply in this market is highly distributed and does not pose a risk because most of the top users are supply-only, maintain a strong health score, or are looping USDT with itself.

 ![image (7)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e679b5071cb59012daa6d9960ebed66dc3b9e818.png)

The most common asset borrowed against USDT is USDT itself, followed by other stablecoins, significantly reducing the risk of liquidations in this market.

 ![image (8)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/3/3097ff0f58095c0ec4e0d4ad6dd462fc78bd8fb7.png)

### Liquidity

USDT’s liquidity against USDC has decreased somewhat since May, though it is still sufficient to recommend a supply cap increase for this market.

 ![image (9)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/f/f3e100c39a828c17a6f30aef426b501dfb9a1b55.png)

### Recommendation

Given the asset’s low-risk usage, we recommend doubling its supply cap.

## USDC (BNB Chain)

USDC’s supply and borrow caps are 74% and 95% utilized, respectively, following continued growth on both sides of the market.

 ![image (10)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/f/f185e45e37361c19fd78bd66edfde48f5cf0519f.png)

 ![image (11)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/95dead35a6a1a2560b02476b3f83a6dcdc8ddc0d.png)

### Borrow Distribution

Borrow positions are not highly concentrated, and the largest user is borrowing USDC against USDT, putting them at very low risk of liquidation.

 ![image (12)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/7/768e5cd36a3347857d59a6477d31bef5e3699331.png)

Many other top borrowers share the same positional composition; there are only two in the top ten borrowers that are borrowing against an uncorrelated asset (BTCB). Overall, USDT is the most popular collateral asset, followed by BTCB and WBNB.

 ![image (13)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/7/74a751f09a4c6a4c57559fa38456133527b7ac4f.png)

### Liquidity

USDC’s liquidity has been stable in recent months, with a 30M swap to USDT able to be completed at less than 10% price slippage.

 ![image (14)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/c/c3fc220eeb4b5b0e0a025bd18621a509120a7ee5.png)

### Recommendation

Considering user behavior and composition, as well as the asset’s stable liquidity, we recommend increasing USDC’s borrow cap.

## wstETH (BNB Chain)

wstETH has reached its supply cap, while borrowing activity of the asset is relatively minimal.

 ![image (15)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/12eb485cbfd492b9741673d1af6b2235d6000b08.png)

 ![image (16)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/3/36d96cd999fe379d200d204da4048703a0630bd0.png)

### Supply Distribution

The increase in supply has led to an increase in ETH borrowed, maintaining the market’s lower risk of widespread liquidations.

 ![output (95)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/95db3cc4a8982f42bded6ef69a7a60530b1fa16a.png)

The market is somewhat concentrated, with the largest user accounting for more than 50% of the total supply; they are borrowing ETH and thus at lower risk of liquidation. However, the second-largest user is borrowing WBNB against USDC and ETH with a health score of 1.15, presenting a moderate risk of liquidation.

 ![image (17)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/4407c5e74bc5a2baf610b8f210c7e767eaeef7d0.png)

This [user](https://community.chaoslabs.xyz/aave/risk/wallets/0xd582f5149bad227fb64355e5655d43d549914e32) has been somewhat active, repaying some of their WBNB debt on July 5; this suggests they are actively monitoring their position and may repay some debt should they approach liquidation.

 ![image (18)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/1d741dc222cbc85e6ae0919a14ad394ab54b7a7c.png)

### Liquidity

wstETH’s liquidity has seriously degraded over the past month, potentially posing a risk to the protocol should the above user’s position be allowed to grow. The Lido team has informed us that they have ceased liquidity support for the asset on BNB Chain.

 ![image (19)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/92b2f16f56fe1ed8e57f7f69bfc140cb1cee0c22.png)

### Recommendation

As a result of the asset’s degraded liquidity, we recommend setting its supply and borrow caps to 1.

# **Specification**

| **Instance** | **Asset** | **Current Supply Cap** | **Recommended Supply Cap** | **Current Borrow Cap** | **Recommended Borrow Cap** |
| --- | --- | --- | --- | --- | --- |
| Celo | CELO | 3,000,000 | 4,500,000 | 100,000 | 200,000 |
| Celo | USDT | 12,000,000 | 24,000,000 | 3,600,000 | - |
| BNB Chain | USDC | 60,000,000 | - | 40,000,000 | 54,000,000 |
| BNB Chain | wstETH | 3,800 | 1 | 190 | 1 |

# **Next Steps**

We will move forward and implement these updates via the Risk Steward process.

# **Disclaimer**

Chaos Labs has not been compensated by any third party for publishing this AGRS recommendation.

# **Copyright**

Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain)

---

<div class="post-metadata">

**Author:** ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)\
**Post date:** [July 21, 2025, 9:48pm UTC](https://governance.aave.com/t/chaos-labs-risk-stewards-adjust-supply-and-borrow-caps-on-aave-v3-07-21-25/22642/2 "2025-07-21T21:48:10Z")

</div>

# **Summary**

Additionally we present a proposal to:

- Increase WETH’s supply and borrow caps on the Celo instance.
- Increase weETH’s supply cap on the Arbitrum instance.
- Increase wrsETH’s supply cap on the Base instance.
- Increase weETH’s supply cap on the Base instance.
- Increase USDT’s supply cap and borrow on the Ethereum Core instance.
- Increase PT-sUSDe-25SEP2025’s supply cap on the Ethereum Core instance.

All cap increases are backed by [Chaos Labs’ risk simulations](https://cdn.sanity.io/files/zmh9mnff/production/130e1060165f7ab0766bb4c70cc2ec41c1d1e458.pdf), which consider user behavior, on-chain liquidity, and price impact, ensuring that higher caps do not introduce additional risk to the platform.

## WETH (Celo)

WETH’s supply cap utilization has reached 83%, while its borrow cap utilization has reached 100%.

 ![Screenshot 2025-07-21 at 11.57.33 AM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/6/6bdd2f1f35f61c91e4658ce69670e020e89b12e4.png)

 ![Screenshot 2025-07-21 at 11.57.46 AM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/917d7b00a9c324a1f193ac8311245f78ba9136a7.png)

### Supply Distribution

WETH’s supply is moderately concentrated, with the top supplier accounting for 26% of the total supply. However, since this user currently holds a health score of 1.41, we do not view this as a significant concern.

 ![Screenshot 2025-07-21 at 11.58.59 AM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/0/00fc7e0393ca1ba829fafae04c4b1d3d60c03b95.png)

The rest of the top suppliers either have no borrowing activity or maintain high health scores, which largely reduces the risk of liquidation.

All supplied WETH is currently being used to borrow USDT, with a total borrowed amount of 1.62M.

 ![Screenshot 2025-07-21 at 12.02.27 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/14abf2fb1561feb35bb28093083ef0b83826c043.png)

### Borrow Distribution

The borrower distribution of WETH is concentrated, with the top borrower currently accounting for 47% of the total. However, this user holds a health score of 1.22, indicating limited immediate liquidation risk. All other top borrowers maintain strong health scores, which further reduces the likelihood of liquidations.

 ![Screenshot 2025-07-21 at 3.31.56 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/19ea0c4f7e36c27b2ef9b5001a94320df2fdf7b4.png)

### Liquidity

WETH’s liquidity has remained generally stable over the past two months, supporting for cap increases.

 ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/c/c328fe2208658ce6595cb536b49dfab0bc4368df.png)

### Recommendation

Given the safe user behavior and on-chain liquidity, we recommend increasing both the supply and borrow caps for WETH.

## weETH (Arbitrum)

weETH has reached 100% supply cap utilization.

 ![Screenshot 2025-07-21 at 12.06.36 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/4c0463ec5ad88ae6a03f7dffed77447700b0c34c.png)

 ![Screenshot 2025-07-21 at 12.07.01 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e7f8a8fd8b1945fd295a7f019af115a45e1c3cb6.png)

### Supply Distribution

weETH’s supply is not concentrated, with the top supplier accounting for only 10% of the total distribution. Additionally, all top suppliers are borrowing WETH, wstETH, or weETH itself, assets that are assumed to follow similar price trajectories, which largely reduces the risk of liquidation.

 ![Screenshot 2025-07-21 at 12.07.23 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/f/f77164d0b289d32c3a39a81b4631bfce7c54fef3.png)

WETH is the largest borrowed asset against weETH, accounting for approximately 98% of the total distribution. This significantly reduces the likelihood of large-scale liquidations.

 ![Screenshot 2025-07-21 at 12.11.24 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/5/587bd79b8b801251b5d95ed891e4028804b2c3de.png)

### Liquidity

weETH’s on-chain liquidity has remained generally stable over the past two months. Currently, a sell of 250 weETH would incur less than 6% price slippage.

 ![image (1)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/4387fb84f8a57034a95643a1d50cbe203d1682f6.png)

### Recommendation

Given the safe user behavior and on-chain liquidity, we recommend increasing weETH’s supply cap.

## weETH (Base)

weETH has reached 92% supply cap utilization.

 ![Screenshot 2025-07-21 at 12.21.52 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/5/5eecbb4dfdd148986b3efd65564b86a1c363dc26.png)

 ![Screenshot 2025-07-21 at 12.22.21 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/c/cb37dba032527f7bd3dd8cbb602791e2918b13d4.png)

### Supply Distribution

The supply of weETH does not present significant concentration risk, with the top supplier accounting for only 14% of the total distribution. Additionally, all top suppliers are borrowing WETH or having no borrowing activities, which largely reduces the risk of liquidation.

 ![Screenshot 2025-07-21 at 12.22.08 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/3/33c1c256dc25f42d0de024dd4446698244a42995.png)

Aligned with our analysis above, the largest borrowed asset against weETH is WETH, accounting for 97% of the total distribution.

 ![Screenshot 2025-07-21 at 12.24.53 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/5/53f19b383ff5900c8dbd552c6cde303858ffd6d4.png)

### Liquidity

weETH’s on-chain liquidity has remained generally stable over the past three months, with a recent surge. Currently, a 200 weETH sell to USDC would incur slippage below the liquidation bonus threshold.

 ![image (2)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/8/8886234ac91fda6b3dc98cb589d2de3e291b5ab1.png)

### Recommendation

Given the on-chain liquidity and user-behavior, we recommend increasing weETH’s supply cap.

## wrsETH (Base)

wrsETH has reached 94% supply cap utilization.

 ![Screenshot 2025-07-21 at 12.31.54 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/7/784063066c3c9f640abe8e75942e6418221f9c2e.png)

 ![Screenshot 2025-07-21 at 12.32.17 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/95f55e9db3d429f07da16626450967ab94ebb7b3.png)

### Supply Distribution

As noted in our previous analysis, wrsETH’s supply distribution is concentrated in a single position, which accounts for 93% of the total supply, presenting a concentration risk. However, since this user is currently borrowing wstETH, a highly correlated asset, and maintains a solid health score, we believe the risk remains within a manageable range.

 ![Screenshot 2025-07-21 at 12.32.50 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/9a64caebdcfa9d36c877ccfbcd8db640b05e455c.png)

### Liquidity

wrsETH’s on-chain liquidity has improved since our last review. Currently, a sell of 500 wrsETH to USDC would incur less than 1% price slippage.

### Recommendation

Given the user-behavior and on-chain liquidity, we recommend increasing wrsETH’s supply cap.

## **USDT** (Ethereum Core)

USDT has reached 99% supply cap utilization.

 ![Screenshot 2025-07-21 at 4.15.37 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/97574d7da49188ad944485f329fbf9bedc8ccb32.png)

 ![Screenshot 2025-07-21 at 4.17.14 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/8/8ceaccb82fc9b75c17d74b6c6574e193e07b0f85.png)

### Supply Distribution

The supply distribution of USDT presents limited liquidation risk, as all top suppliers except one currently have no borrowing activity. The only supplier with an active borrow position holds a health score of 1.43, indicating limited immediate liquidation risk.

 ![Screenshot 2025-07-21 at 4.17.50 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/d/d93cb4b9935a6f75dd76fd97741471c9f46e83b0.png)

### Recommendation

Given the safe user-behavior and on-chain liquidity, we recommend increasing USDT’s supply cap.

## **PT-sUSDe-25SEP2025** (Ethereum Core)

PT-sUSDe-25SEP2025 has reached 100% supply cap utilization, doubling from 200M to 400M within a week, indicating strong market demand.

 ![Screenshot 2025-07-21 at 1.40.20 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e2ac4d624679d1bd4f61b449a97bb9087fe91143.png)

 ![Screenshot 2025-07-21 at 1.41.11 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/9b1c41ea5a5a773d420bac8abf967754a75b01ed.png)

### Supply Distribution

The PT-sUSDe supply distribution is not concentrated, with the top supplier accounting for only 13% of the total. Given that this user is borrowing USDT and USDC, they do not pose a significant liquidation risk. Additionally, all other top suppliers are borrowing USDT, USDC, or USDe, which further reduces the likelihood of liquidation.

 ![Screenshot 2025-07-21 at 1.41.47 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/b/bd9d1631e56b46cb603325f4396660a23bb4eca4.png)

The largest borrowed asset against PT-sUSDE is USDT, which accounts for 48% of the total distribution.

 ![Screenshot 2025-07-21 at 1.43.07 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/9fce84f74426e77090471ebcb4c2c6319d43d30f.png)

### Liquidity and Market

PT-sUSDe-25SEP2025’s Pendle AMM liquidity currently supports a 36M swap with less than 3% price slippage.

 ![image (3)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/6/6af2f615f37f2fa4f0886bf4059767690605fce2.png)

PT-sUSDe-25SEP2025’s on-chain liquidity has remained stable, with SY liquidity consistently around 40M and PT liquidity approaching 15M.

 ![image (4)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/6/6787317f6ec001347765b5d7a11d4abe70a6bba5.png)

There is additionally more than 24M worth of PT buy orders before 13.5% implied yield.

 ![Screenshot 2025-07-21 at 1.57.20 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/a/a483fab5f3921a7d60b22b4cc8e90620c7e4e00e.png)

The PT-sUSDe-25SEP2025 market has exhibited a steady upward trend in yield over the past week, consistently remaining in the 10% to 12% range.

 ![Screenshot 2025-07-21 at 1.48.05 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/ed4caa41f74a2a40574758e366dec72ff77cbe2c.png)

### Recommendation

Considering user behavior, market liquidity, and strong demand, we recommend raising the supply cap to 600M.

# **Specification**

| **Instance** | **Asset** | **Current Supply Cap** | **Recommended Supply Cap** | **Current Borrow Cap** | **Recommended Borrow Cap** |
| --- | --- | --- | --- | --- | --- |
| Celo | WETH | 1,000 | 2,000 | 450 | 900 |
| Arbitrum | weETH | 110,000 | 121,000 | - | - |
| Base | weETH | 100,000 | 120,000 | - | - |
| Base | wrsETH | 3,000 | 3,250 | - | - |
| Ethereum Core | USDT | 6,600,000,000 | 7,300,000,000 | 6,270,000,000 | 7,000,000,000 |
| Ethereum Core | PT-sUSDe-25SEP2025 | 400,000,000 | 600,000,000 | - | - |

# **Next Steps**

We will move forward and implement these updates via the Risk Steward process.

# **Disclaimer**

Chaos Labs has not been compensated by any third party for publishing this AGRS recommendation.

# **Copyright**

Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain)

---

<div class="post-metadata">

**Author:** ![system](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e11637c36f45ffa158f2146f5c19438d46e0824d.svg) [@system](https://governance.aave.com/u/system)\
**Post date:** [August 20, 2025, 9:48pm UTC](https://governance.aave.com/t/chaos-labs-risk-stewards-adjust-supply-and-borrow-caps-on-aave-v3-07-21-25/22642/3 "2025-08-20T21:48:36Z")

</div>

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