Summary
A proposal to:
- Increase USDC’s borrow cap on the BNB instance.
- Increase SCR’s supply and borrow caps on the Scroll instance.
USDC (BNB)
The borrow cap for USDC has reached 99% utilization, while its supply cap utilization stands at 76%.
Supply Distribution
The current supply distribution of USDC presents minimal liquidation risk. Among the top ten USDC suppliers, only two have active borrowing positions, while the rest do not engage in borrowing, eliminating any liquidation concerns at this moment. Additionally, the two active positions maintain strong health scores, indicating no significant risk at this time.
Borrow Distribution
USDC’s borrow distribution is fairly distributed. Among the top USDC borrowers, all positions except for two, which are collateralizing USDC-correlated assets, maintain a health score above 1.3, indicating limited liquidation risk at this time.
BTCB is the largest collateral asset backing USDC, representing 64% of the total distribution, followed by USDT at 12%.
Liquidity
USDC’s liquidity has remained stable over the past three months, with a 35M swap to USDT incurring less than 1% price slippage.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 19.5M and borrow cap to 13M USDC.
SCR (Scroll)
SCR’s supply cap utilization has reached 99%, while its borrow cap utilization has hit 100%.
Supply Distribution
The supply distribution of SCR presents limited liquidation risks. Among the top 10 SCR suppliers, 8 have no borrowing activity, eliminating any liquidation risk at this time. The remaining two maintain high health scores above 1.9, reducing liquidation risks.
Borrow Distribution
The majority of top SCR borrowers maintain strong health scores above 2, significantly reducing liquidation risk. The only two positions with health scores near 1 have borrowed minimal amounts of SCR, with a total value of less than $2K, posing no significant concern at this time.
The largest collateral asset backing SCR is WETH, accounting for 58% of the total distribution, followed by weETH at 18%.
Liquidity
The liquidity of SCR is relatively limited compared to its total on-chain supply, with a 100K SCR sell currently incurring less than 5% price slippage. However, based on our analysis of SCR’s supply and borrow distribution, this does not present significant concern at this moment.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 1.08M and the borrow cap to 18K.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| BNB | USDC | 15,000,000 | 30,000,000 | 10,000,000 | 20,000,000 |
| Scroll | SCR | 720,000 | 1,080,000 | 12,000 | 18,000 |
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