Summary
A proposal to:
- Increase ezETH’s supply cap on the Base instance.
- Increase wstETH’s supply and borrow caps on the Base instance.
- Increase USDC.e’s supply cap on the Sonic instance.
- Increase USDT’s supply cap on the Celo instance.
- Increase CELO’s supply cap on the Celo instance.
All increases are backed by Chaos Labs’ risk simulations, which consider user behavior, on-chain liquidity, and price impact, ensuring that higher caps do not introduce additional risk to the platform.
ezETH (Base)
ezETH’s supply cap utilization has reached 98%.
Supply Distribution
The supply distribution of ezETH is somewhat concentrated, with the top supplier holding 38% of the total supply. However, as this user is borrowing wstETH, a highly correlated asset, the position presents minimal liquidation risk at this time.
The remaining top suppliers either hold relatively small positions or are also borrowing wstETH, posing no significant concerns at this time.
The top borrowed asset against ezETH is wstETH, accounting for 99% of the total distribution, which significantly reduces the likelihood of large-scale liquidations.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 1.9K ezETH.
wstETH (Base)
The supply cap utilization of wstETH has reached 75%, while its borrow cap utilization stands at 67%.
Supply Distribution
The supply of wstETH presents no concentration risk, with the top supplier holding less than 10% of the total distribution. Among the top 10 suppliers, five are borrowing WETH, which presents limited liquidation risks. The remaining top suppliers maintain relatively high health scores (>1.2), posing no significant concerns at this time.
The largest borrowed asset against wstETH is WETH, accounting for 64% of the total distribution.
Borrow Distribution
The borrow distribution of wstETH presents limited liquidation risks, as the top borrowers are either collateralizing ezETH or maintaining a strong health score.
The top collateral asset against wstETH is ezETH, accounting for 78% of the total distribution.
Liquidity
wstETH’s liquidity has fluctuated but remained generally stable over the past three months, currently, a 1.5K wstETH sell to USDC incurring less than 4% price slippage.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 18K wstETH and borrow cap to 2.08K wstETH.
USDC.e (Sonic)
The supply cap utilization of USDC.e has reached 96%.
Supply Distribution
The supply distribution of USDC.e presents limited liquidation risks. Except for four positions, all top suppliers either have no borrowing activity or are borrowing USDC.e itself, posing minimal liquidation risks. The remaining four suppliers maintain high health scores or are looping the asset with itself, raising no significant concerns at this time.
The largest borrowed asset against USDC.e is USDC.e itself, accounting for 41% of the total distribution, which significantly reduces the likelihood of large-scale liquidations.
Recommendation
Given the user behavior, we recommend increasing the supply cap to 190M USDC.e.
USDT (CELO)
USDT’s supply cap utilization has reached 75%, while its borrow cap utilization stands at 16%.
Supply Distribution
USDT’s supply distribution presents concentration risks, with the top four suppliers accounting for 97% of the total supply. However, all four suppliers are either engaging in looping or maintain a high health score, posing limited liquidation risk at this time.
Liquidity
Currently, a 500K USDT sell incurs less than 1% price slippage, supporting a supply cap increase.
Recommendation
Given the user behavior and liquidity, we recommend increasing the supply cap to 3M USDT.
CELO (CELO)
CELO’s supply cap utilization has reached 100%, while its borrow cap utilization stands at 50%.
Supply Distribution
CELO’s supply distribution presents a concentration risk, with the top holder accounting for 65% of the total supply and the second-largest holder holding 30%. However, neither of these positions currently has any borrowing activity, thereby posing no immediate liquidation risk.
Liquidity
Currently, a 200K CELO sell to USDC incurring less than 2% price slippage, supporting a supply cap increase.
Recommendation
Given the user behavior and liquidity, we recommend increasing the supply cap to 1.5M CELO.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Base | ezETH | 1,200 | 1,900 | - | - |
| Base | wstETH | 14,000 | 18,000 | 1,600 | 2,080 |
| Sonic | USDC.e | 140,000,000 | 190,000,000 | 110,000,000 | - |
| Celo | USDT | 2,000,000 | 3,000,000 | 1,800,000 | - |
| Celo | CELO | 1,000,000 | 1,500,000 | 100,000 | - |
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 ARFC.
Copyright
Copyright and related rights waived via CC0