Chaos Labs - Supply Cap Methodology

[ChaosLabs]

As outlined in the methodology above, we use a threshold of $400K as the initial target loss for our recommendations. This figure was chosen as an initial conservative figure for this methodology.

@ChaosLabs

We binary search for optimal supply caps, limiting protocol losses to some target loss K. Initially, we propose capping potential protocol losses to 0.1% of the safety module’s funds, which currently equates to $400K U.S. dollars. In case this figure limits future supply cap increases, the community could decide on a different threshold.

If this target loss proves to be limiting in terms of increasing supply caps for certain assets over time, the community can decide to raise the threshold to reflect a higher risk appetite.

We value the community’s input on this matter and encourage any suggestions or feedback to enhance our methodology.