Summary
A proposal to:
- Increase RLUSD’s supply and borrow cap on the Ethereum Core instance.
- Increase EURe’s supply and borrow cap on the Gnosis instance.
- Increase GHO’s supply and borrow cap on the Base 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.
rlUSD (Ethereum Core)
RLUSD has reached 92% supply cap utilization and 100% borrow cap utilization shortly after listing. Its borrow cap is set relatively conservatively compared to its supply cap, resulting in just 10.8% utilization.
Supply Distribution
Supply are concentrated, with the largest user accounting for 57% of the total. As the asset is not enabled as collateral, none of the suppliers is borrowing, ensuring no liquidation risk.
Borrow Distribution
Borrows are concentrated, with the largest user accounting for 99% of the total. This user is borrowing against two liquid collateral assets — AAVE and weETH — reducing risk in the event of liquidation.
Besides this user, others are borrowing against cbBTC, USDC, and WETH, all highly liquid assets, reducing the risk in this market.
Recommendation
Given user behavior and the borrow cap’s low value relative to the supply cap, we recommend doubling both supply and borrow cap.
EURe (Gnosis)
EURe has reached 83% supply cap and 98% borrow cap utilization following new activity in the market.
Borrow Distribution
Borrows are relatively well distributed, with the largest user borrowing against sDAI and representing 19% of the total.
The top four borrowers are all borrowing against sDAI, reducing their likelihood of liquidation. While sDAI and EURe are not perfectly correlated, both are stablecoins, reducing their volatility and liquidation risk.
Liquidity
EURe’s liquidity on Gnosis is somewhat volatile but sufficient given the activity present in this market, which has been improving in recent weeks.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing EURe’s supply and borrow caps.
GHO (Base)
GHO has reached 63% supply cap utilization and 87% borrow cap utilization, with consistent growth in borrows.
Supply Distribution
Supply is highly concentrated, though the asset cannot be used as collateral, thus this does not pose a risk of a large supplier being liquidated.
While supply utilization is not high, we anticipate that the opening of a new Balancer pool containing Aave-deposited GHO on Base will significantly increase supply demand.
Borrow Distribution
Borrowing is highly distributed, with the 15 largest borrowers accounting for less than 50% of the total. This significantly reduces the risk of widespread liquidations in this market.
WETH and cbBTC continue to be the most popular collateral assets for GHO borrows; both assets are highly liquid.
Recommendation
Given user behavior and an anticipated supply increase, we recommend increasing the supply and borrow caps in this market.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum Core | rlUSD | 50,000,000 | 100,000,000 | 5,000,000 | 10,000,000 |
| Gnosis | EURe | 10,500,000 | 13,000,000 | 5,600,000 | 11,200,000 |
| Base | GHO | 10,000,000 | 20,000,000 | 4,500,000 | 9,000,000 |
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 ARFC.
Copyright
Copyright and related rights waived via CC0