Summary
A proposal to:
- Increase USDe’s borrow cap on the Ethereum Core instance.
- Increase 1INCH’s supply cap on the Ethereum Core instance.
- Increase RLUSD’s supply and borrow cap on the Ethereum Core 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.
USDe (Ethereum Core)
USDe has reached its borrow cap following significant new demand in the market, while its supply cap is at 53% utilization.
Borrow Distribution
Borrows of USDe are highly distributed, with the largest position being $30M. Together, the top eight wallets account for 57% of the total USDe borrowed.
There has been rapid growth in USDe borrows against both WETH and wstETH, while USDS remains the most popular collateral asset. None of the largest collateral assets against USDe present a significant risk, as all are highly liquid.
Liquidity
USDe’s liquidity on Ethereum has deteriorated somewhat in recent weeks, with a 15M USDT to USDe swap incurring less than 1% price impact. However, this is still sufficient to support an increase in its borrow cap.
Recommendation
Given strong new demand, distributed borrowers, and on-chain liquidity, we recommend increasing USDe’ borrow cap.
1INCH (Ethereum Core)
1INCH has reached 95% supply cap utilization and 100% borrow cap utilization following new activity in the market.
Supply Distribution
Supplying is somewhat concentrated, with the top three wallets accounting for 70% of the total. However, they all maintain relatively strong health scores. Additionally, the asset’s $4.5M debt ceiling is just 11% utilized, reducing the risk in this market.
Users are primarily borrowing USDC, though recent activity has been largely denominated in USDT.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing 1INCH’s supply cap.
RLUSD (Ethereum Core)
RLUSD has reached 97% supply cap utilization and 100% borrow cap utilization following new activity in the market.
Supply Distribution
Supplying is somewhat concentrated, with the top wallet accounting for 38% of the total. However, none of the top position represents a liquidation risk thanks to RLUSD not being usable as collateral.
Borrow Distribution
RLUSD borrowing is highly concentrated among the top two positions, representing 93% of the total. However, the top positions mantain a safe health score above 1.5, ensuring they do not provide a significant liquidation risk.
cbBTC represent the primary collateral for borrowing RLUSD, with AAVE and weETH representing other major collaterals.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing RLUSD’s supply and borrow caps.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum Core | USDe | 960,000,000 | - | 220,000,000 | 440,000,000 |
| Ethereum Core | 1INCH | 9,000,000 | 18,000,000 | 475,200 | - |
| Ethereum Core | RLUSD | 100,000,000 | 150,000,000 | 10,000,000 | 20,000,000 |
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