Overview
Chaos Labs supports listing WBTC on Aave V3’s Sonic instance. Below is our analysis and risk parameter recommendations for the initial listing.
WBTC
WBTC on Sonic uses a LayerZero OFT contract, as is the case for a number of assets like USDT0 and rsETH on Arbitrum, presenting limited new technical risk, though the contract is owned by a 2-of-3 multisig. The asset’s popularity and use of a common bridging standard increases the likelihood that cross-chain arbitrageurs will cover the asset and ensures quick mean reversion during depegs.
Usage on Aave
On Ethereum Core, WBTC’s largest market, WBTC is largely used as a collateral asset, with the vast majority being used to borrow stablecoins.
There is relatively limited and inconsistent borrow demand for the asset, though the most common collateral asset is wstETH. LBTC has recently become more popular as a collateral asset against WBTC, facilitated by an FBTC/WBTC E-Mode.
Market Cap and Liquidity
WBTC has displayed a consistent upwards trend in its supply on Sonic, indicating that its listing on Aave may spark further adoption.
Its on-chain DEX liquidity has also been improving, with a variety of pools where the asset is paired primarily with WETH and USDC; this provides a strong foundation with which to list the asset on Aave.
LTV, LT, and Liquidation Bonus
Given that WBTC has long been deployed on other instances with no problems related to its collateral parameters, we recommend aligning WBTC on Sonic with WBTC on Optimism, providing a slightly higher Liquidation Bonus than on other instances to account for its lower supply.
Supply Cap and Borrow Cap
Taking into account WBTC’s status as a trusted asset on Aave, as well as the anticipated increase in its activity on Sonic following listing, we recommend setting its initial supply cap to 50 WBTC. Given the lack of demand for borrowing BTC-linked assets (against anything except yield-bearing or points-bearing BTC assets, which are not currently listed on Sonic), we recommend setting the borrow cap to 10% of the supply cap.
IR Curve Parameters
We recommend aligning the interest rate parameters with those of WBTC on other Layer 2 networks to ensure consistency across similar assets on Aave V3.
Price Oracle
We recommend utilizing the WBTC/USD Chainlink price feed for this asset.
Recommendations
Following the above analysis, we recommend listing WBTC on Sonic with the below parameter settings:
| Parameter | Value |
|---|---|
| Chain | Sonic |
| Isolation Mode | No |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap | 50 |
| Borrow Cap | 5 |
| Debt Ceiling | - |
| LTV | 73.00% |
| LT | 78.00% |
| Liquidation Bonus | 7.50% |
| Liquidation Protocol Fee | 10.00% |
| Variable Base | 0.0% |
| Variable Slope1 | 4.00% |
| Variable Slope2 | 60.00% |
| Uoptimal | 45.00% |
| Reserve Factor | 50.00% |
| Stable Borrowing | Disabled |
| Flashloanable | Yes |
| Siloed Borrowing | No |
| Borrowable in Isolation | No |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.
Copyright
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