Chaos Labs Risk Stewards - Increase Supply Caps on Aave V3 - 05.04.25

[ChaosLabs]

Summary

A proposal to:

• Increase PT-eUSDE-29MAY2025’s supply 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.

PT-eUSDE-29MAY2025 (Ethereum Core)

PT-eUSDE-29MAY2025 has reached 100% of its supply cap utilization and a quarter of a billion dollars within the first 3 days of its Aave listing, and we expect significant demand for the asset over the next days.

Supply Distribution

The asset’s supply is fairly concentrated, with the top 10 users accounting for 80% of the total. The second biggest supplier maintains a supply-only position, with the rest of the top positions borrowing highly correlated assets such as USDT and USDC.

None of the positions poses a significant liquidation risk based on the Oracle implementation and the robust underlying. Moreover, 90% of PT collateralized debt is denominated in USDT, given its lower borrow rate and higher liquidity availability following recent Huobi deposits into the market.

The PT-eUSDe market experienced a brief yield decline following an initial surge in demand, which drove prices higher. However, this movement has since normalized. Given the relatively short time to maturity, the PT market price reflected only a temporary spike of approximately 15 basis points, consistent with a transient 2% drop in implied yield.

Recommendation

Given safe user behavior, the market’s liquidity, and the high demand for the asset, we recommend increasing the supply cap to 400,000,000 PT-eUSDE-29MAY2025.

Specification

Instance	Asset	Current Supply Cap	Recommended Supply Cap	Current Borrow Cap	Recommended Borrow Cap
Ethereum Core	PT-eUSDE-29MAY2025	250,000,000	400,000,000	-	-

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 AGRS recommendation.

Copyright

Copyright and related rights waived via CC0

[Benji533]

Hey @ChaosLabs - as per the original proposal, the LLTV, LT and PT discount rate for PTs can be adjusted with a 2 day timelock. Can you please advise where exactly in these forums this will be announced, and if there is a way users can make sure they are notified in time for these changes?

[ChaosLabs]

Hey @Benji533, thank you for the comment.

As mentioned previously, risk parameter updates for the LTV, LT and LB are performed in an automated fashion every three days, monotonically increasing until maturity in accordance with the presented trajectory in each respective asset listing post. All automated Risk Oracle updates can be observed in our Edge Dashboard.

As for the PT discount rate, this will be updated manually at the moment, and we will post on the forum shortly before executing such an update. In many instances, this can be performed in a matter of minutes after posting. This adheres to our comprehensive rate pricing methodology referencing the market price of the PT; however, a discount rate update is increasingly rare as the market converges to maturity per the underlying algorithm. Please adhere to the following for more information.

[Benji533]

@ChaosLabs thank you for the fast response.
I would like to follow up with 2 more questions:

1. Your Edge dashboard links to this recent LT update from 6 hours ago: Ethereum Transaction Hash: 0x4d9d261437... | Etherscan

Does this mean that 72 hours from this txn the LT will be updated (in this case stay the same) to 91%? so in other words, by visiting this dashboard daily, I can keep myself updated for any future changes in LT 3 days before they are executed?
If I am getting this wrong, and the txn signals implementation that already took place, then where is the 3 days unlock comes into play?

2. To make sure my understanding is correct: the PT-eUSDe market launched with a current linear discounted rate of of 7.87% and an adjustment partner is set to relative 5% every 2 days. Does this means, that the biggest possible increase overnight to the discount rate would be 7.87%*1.05 = 8.2635% ? so reaching the max discount of 39% will be gradual over many more days?

[harshpandey]

Hey @Benji533

Updates pushed on the RiskOracle are injected immediately onto the protocol given the respect timelock and the maxChangeAllowed for each param using the middleware contract AaveStewardInjector.

Regarding the tx you mentioned above, LTV and LT were unchanged while the LB reduced from 3.3% to 3% as you can see here.

The 3 day timelock is enforced if an update is already injected into the protocol, so we need to wait for 3 more days to inject an update again into the protocol.

So by visiting the dashboard daily, you don’t see the changes that will be pushed in the coming days, rather the changes that were already applied on the protocol. Since the time they were applied you can be certain that in the next 3 days the params won’t change, and 3 days later they can change only by the maxPercentChange allowed.

About 2. yes, your understanding is correct.

[CryptoScam]

How can we check upcoming parameters update to make sure that our position won’t be liquidated following a parameter change?

[Benji533]

Good question. I would like to know as well.