Some assets have low utilisation. For example on Aave V1, only 1.91% of $1.4m Enjin Coin is being used.
Given that those assets are secured by the Safety Module, my intuition says that these assets are a burden on the system. The Safety Module could be securing $1.4m worth of a higher-demand asset. It follows that such assets should be delisted.
Thoughts?
@oaksprout thanks for opening the thread and giving highlight for the topic since the aim of Safety Module is to cover the asset-related risk of the system and for providing this protection the SM stakers are receiving AAVE rewards.
Indeed, ENJ has around 1.5 mm USD worth deposits with 1.91% of utilization. However, the utilization rate indicates the borrowing utilization, not for example how much ENJ has been used as a collateral, which is main use-case in the Aave Protocol.
I would confirm that the ENJ market is small (1.5 mm USD worth) at the moment, however it might currently create around 0.5-0.8 mm USD demand on stablecoin borrowings.
What would be interesting is to create a market for smaller market range collaterals, which would create some interesting yield rates for stablecoin depositors and at the same time de-risking the main pool. This would of course require that the SM would be tranched one way or another (see Delphi Digital discussion on the topic).
Ah yes of course, I overlooked the collateral use case. As you say, that’s the main thing. Though thinking about it, I guess the best assets will be both desirable to deposit and borrow.
Interesting suggestion regarding a separate market for smaller range collaterals. I can see how that would work with aDAOs but need to go back and look more deeply at the newer-proposed tranching models.