Summary
A proposal to:
- Increase WETH’s supply and borrow caps on the Linea instance.
All recommended increases are backed by Chaos Labs’ risk simulations, which consider the user behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
WETH (Linea)
The supply cap utilization of WETH has reached 100%, while its borrow cap utilization stands at 95%.
Supply Distribution
The supply distribution of USDC is fairly distributed, with 3 of the top 10 users in the WETH pool maintaining supply-only positions. The remaining users use WETH to borrow USDC or USDT. However, they maintain safe health scores over 1.5, significantly reducing their liquidation risks.
Borrow Distribution
While the USDC borrow distribution is significantly more concentrated than its supply, the top two addresses represent a significant portion of the demand. These two positions use ezETH collateral to borrow WETH, however, thanks to the high correlation between the two assets, the positions do not present a liquidation risk.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 2,400 WETH and borrow cap to 2,200 WETH to allow for the full utilization of the asset.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Linea | WETH | 1,200 | 2,400 | 1,100 | 2,200 |
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 ARFC.
Copyright
Copyright and related rights waived via CC0