Summary
A proposal to:
- Increase wBNB’s supply cap on the BNB Chain instance
- Increase USDC.e’s supply cap on the Sonic instance
- Increase wS’s borrow cap on the Sonic instance
- Increase wrsETH’s supply cap on Base instance.
- Maintain wstETH’s supply cap on the BNB Chain instance
wBNB (BNB Chain)
wBNB’s supply cap utilization has reached 100%.
Supply Distribution
The top supplier in the BNB market (0x0ac…3bf8) holds 50% of the total supply and maintains a health factor of 2. On-chain events indicate that the position is actively managed, with 5-6 transactions per week to maintain a stable health factor above 2.
The largest borrowed asset against wBNB is USDT, accounting for 84% of the borrowed assets.
Liquidity
The on-chain liquidity for BNB has been stable and decent over the past three months. Currently, a sell order of 20,000 BNB is expected to have a 3.5-4% price impact on the market.
Recommendation
Based on the supply distribution analysis and liquidity metrics, we recommend increasing wBNB’s supply cap to 60,000 wBNB. This recommendation is supported by the active management of top position by supplier, stable health factors, and robust on-chain liquidity. The moderate price impact for large liquidations (3.5-4% for 20,000 BNB) provides adequate protection against potential market stress scenarios.
USDC.e (Sonic)
USDC.e’s supply cap utilization has reached 86%, and its supply on Aave has been steadily increasing over the weeks. In the past 30 days, it has quadrupled.
Supply Distribution
The supply distribution of USDC.e presents limited liquidation risks. The top two suppliers account for 33% of the total supply and are supply-only positions.
The largest borrowed asset against USDC.e is WETH, accounting for 52% of the total distribution.
Recommendation
Based on user behavior and the on-chain supply of USDC.e, we recommend increasing the asset’s supply cap to 300,000,000 USDC.e.
wS (Sonic)
wS’s supply cap utilization has reached 82%, and its borrow cap utilization has reached 94%.
Supply Distribution
The supply distribution of wS presents limited liquidation risks. The top two suppliers account for 66% of the total supply, and they are maintaining supply-only position and position with a very high health factor.
The most borrowed asset against wS is USDC, accounting for 91% of the total share. The total debt borrowed against wS is approximately $7.9 million, which is very low and does not pose a risk to the protocol, given that the total supply of wS is around $83 million.
Borrow Distribution
The borrow distribution of wS presents limited liquidation risks. wS is primarily being borrowed against USDC.e by users who maintain moderately low health factors. While these positions carry some liquidation risk, they do not pose a significant threat to the protocol at this time.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 192,000,000 wS and the borrow cap to 26,000,000 wS.
wrsETH (Base)
wrsETH’s supply cap utilization reached 100% after a user (0xe32…9f7f) supplied 399.9 wrsETH to the pool on March 24, 2025.
Supply Distribution
The supply distribution is highly concentrated, with 99.9% of the total supply provided by a single user. However, this user is solely supplying and faces no liquidation risk. Even if the maximum LTV and LT are increased for this market, making borrowing more practical, and the user starts borrowing, the risk to the protocol remains minimal, as a sell order of 200 wrsETH is expected to have less than a 0.5% price impact.
Recommendation
Based on user behavior and the sufficient on-chain wrsETH liquidity, we recommend increasing the asset’s supply cap to 400 wrsETH.
wstETH (BNB Chain)
wstETH’s supply cap utilization has reached 100%.
Supply Distribution
wstETH supply is highly concentrated among top suppliers. The top suppliers own 55%, while the top 3 suppliers hold 90% of the total wstETH. Except for the top supplier, all others have borrowed ETH against wstETH to employ a looping strategy with low liquidation risk. The top supplier, on the other hand, has debt in BNB with a moderately low health factor.
The largest borrowed asset against wstETH is still ETH, accounting for 50% of the borrowed assets, even though BNB has experienced a significant increase since March 20th, 2025, and now holds 47% of the borrowed asset share.
The top supplier (0xd58…4e32), holding 55% of the wstETH supply, supplied wstETH and borrowed WBNB just before the NIL token launchpad farming began on March 21, 2025, then transferred the borrowed BNB tokens to Binance.
Since the launchpad event has concluded, we believe the increase in wstETH supply is likely to be temporary.
Even if the position owner does not repay and withdraw, we recommend against raising the caps. This is because liquidating 50% of this position would face significant on-chain liquidity constraints, as the user is borrowing a volatile asset and 80% of the on-chain wstETH on the BNB Chain is already deposited in Aave, resulting in slippage exceeding 10%, which is higher than the 7.5% liquidation penalty.
Recommendation
Based on our analysis, we recommend maintaining the current supply caps for wstETH on BNB Chain. The high concentration of supply, combined with limited on-chain liquidity and the potentially temporary nature of the current utilization spike, suggests that increasing caps would introduce unnecessary risk. We will continue monitoring the situation and reassess if market conditions change significantly.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| BNB Chain | wBNB | 50,000 | 60,000 | Fill | - |
| Sonic | USDC.e | 190,000,000 | 300,000,000 | 110,000,000 | - |
| Sonic | wS | 160,000,000 | 192,000,000 | 20,000,000 | 26,000,000 |
| Base | wrsETH | 400 | 600 | - | - |
| BNB Chain | wstETH | 1,900 | - | 190 | - |
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