Gauntlet Borrow and Supply Cap Recommendations for Ethereum and Arbitrum Aave V3 2023-08-16

[Gauntlet]

Gauntlet Borrow and Supply Cap Recommendations for Ethereum and Arbitrum Aave V3 2023-08-16

Per Gauntlet’s supply and borrow cap methodology, we recommend increasing rETH supply cap on Arbitrum v3 to 1700 and increasing LUSD supply cap on Ethereum v3 to 12m.

Specifications

Chain	Asset	Cap	Current	Recommended
Arbitrum	rETH	Supply	1300	1700
Ethereum	LUSD	Supply	6m	12m

Motivation

rETH cap usage is at 97% on Arbitrum v3.
LUSD cap usage is at 95% on Ethereum v3.

Next Steps

Once we receive feedback from @ChaosLabs on the above recommendations, we will move forward with Risk Steward or AIP actions.

[ChaosLabs]

We support the proposed updates.

Additionally, for rETH, we recommend increasing the caps by 2X to 2,600 rETH.
Utilizing our stress test methodology for supply caps, we found that increasing the supply by 2X does not increase the VaR of the system.

[Gauntlet]

We also recommend increasing rETH borrow cap on Arbitrum v3 to 340.

Specifications

Chain	Asset	Cap	Current	Recommended
Arbitrum	rETH	Borrow	170	340

Motivation

rETH borrow cap usage is at 94% on Arbitrum v3.

Next Steps

Once we receive feedback from @ChaosLabs on the above recommendation, we will bundle it together with the LUSD Supply Cap on Ethereum v3, rETH Supply Cap on Arbitrum v3 recommendations for Risk Steward.

[ChaosLabs]

We support the additional recommendation for the rETH borrow cap.

Can @Gauntlet provide feedback on the recommendation to increase the supply cap of rETH to 2,600 instead of 1,700?

[Gauntlet]

Given alignment of the two risk providers on the more conservative of the proposed cap updates, we’ve queued the risk steward transactions here.

Our current methodology does not support raising the rETH supply caps on Arbitrum to 2600 at this time.

Arbitrum: Safe{Wallet} – Transaction queue

Ethereum: Safe{Wallet} – Transaction queue

[ChaosLabs]

This proposal has been executed via Risk Steward.