Base
Simple Summary
A proposal to adjust 9 risk parameters:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| USDbC Collateral Factor | 78% | 76% |
| USDbC Supply Cap | 150,000 | 110,000 |
| USDbC Borrow Cap | 150,000 | 100,000 |
| USDbC Reserve Factor | 75% | 90% |
| DAI Collateral Factor | 82% | 80% |
| DAI Supply Cap | 750,000 | 400,000 |
| DAI Borrow Cap | 500,000 | 300,000 |
| DAI Reserve Factor | 20% | 40% |
| WETH Reserve Factor | 15% | 5% |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust IR parameters for DAI, cbBTC,WETH and USDbC
| DAI IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.75 | 0.6 |
| Multiplier | 0.067 | 0.04 |
| Jump Multiplier | 9 | 4 |
| WETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.8 | 0.9 |
| Multiplier | 0.01 | 0.01 |
| Jump Multiplier | 4.2 | 8 |
| USDbC IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.7 | 0.6 |
| Multiplier | 0.057 | 0.04 |
| Jump Multiplier | 5.7 | 4 |
Rationale
Risk Parameters
Gauntlet recommends a gradual reduction in USDbC and DAI exposure, given the deprecation of USDbC and the declining circulating supply of DAI on Base. Additionally, the ongoing migration to USDS indicates increasing liquidity constraints for DAI. We also recommend risk-off recommendations across all other risk parameters for these two assets. Given the growing demand to use wstETH as collateral against WETH positions, we recommend lowering the reserve factor to further give suppliers higher share of the APRs.
Cap Recommendations
-
USDbC - In line with previous cap decreases, Gauntlet recommends reducing both the supply (150,00 → 110,000) and borrow caps (150,000 → 100,000) to further catalyze deprecation process.
-
DAI - Gauntlet recommends reducing supply caps (750,000 → 400,000) and borrow caps (500,000 → 300,000) and would suggest the community to take similar measures as USDbC to deprecate this market unless Sky (MakerDAO) take further steps to support liquidity/activity on Base.
-
Gauntlet has enacted further cap changes as seen here and here via guardian prior to this proposal and therefore doesn’t include additional cap changes.
Reserve Factor
USDbC Supplies
The previous reserve factor changes have successfully influenced user behavior as seen from the visualization above, with the increase from 50% to 75% driving supplier outflows as intended. Gauntlet now recommends further raising the reserve factor from 75% to 90%, aiming to accelerate the outflows and move closer to full asset deprecation, while simultaneously enhancing reserve accumulation.
The circulating supply of DAI on Base has dropped from over 3.6M to 1.6M, signaling reduced DEX liquidity and weakening on-chain demand, further intensified by the ongoing migration to USDS. Gauntlet recommends increasing the reserve factor from 20% to 40% to implement a deprecation strategy similar to that of USDbC.
WETH Supplies and Borrows
WETH has seen significant growth in both supply and borrow activity, driven by users employing leveraged yield strategies. To further incentivize WETH supply, Gauntlet recommends reducing the reserve factor from 15% to 5%, which would result in an approximate 23 bps risk-free increase in supply APRs.
Collateral Factors (CF)
As mentioned above, we recommend taking further risk-off measures across and DAI and USDbC and suggest decreasing collateral factors by the following degrees:
- Decrease DAI collateral factor from 82% to 80%
- Decrease USDbC collateral factor from 78% to 76%
The reduction in CFs will not trigger any user liquidations.
IR Parameters
DAI IR Parameters
With outflow of large DAI supply positions, the utilization has been trending upwards causing a high degree of rate volatility. To facilitate a smoother user experience, we recommend setting the IR curves with a slope1 of 0.04 and slope2 of 4. Furthermore, we recommend reducing the kink from 70% to 60% which would create more liquidity for users to exit, avoiding a full utilization or a negative user experience due to high APR.
Recommended DAI IR Curve
Projected APRs for DAI
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 0.86 | 2.4 |
| 100 | 161 | 97 |
Current APRs for DAI
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 5 | 3.01 |
| 100 | 232.02 | 184.61 |
USDbC IR Parameters**
We recommend similar IR curve settings to USDbC as seen in DAI for the same reasons as cited above.
Recommended USDbC IR Curve
Projected APRs for USDbC **
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 2.4 | 0.144 |
| 100 | 162 | 16.4 |
Current APRs for USDbC **
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 4 | 0.69 |
| 100 | 175 | 43 |
WETH IR Parameters
With the addition of LRTs (weETH and wrsETH), alongside the growing use of leverage yield strategies involving wstETH, many of which rely on WETH borrows, we recommend increasing the kink for WETH from 80% to 90% to enhance capital efficiency. This adjustment would unlock approximately 3,280 WETH in additional liquidity without amplifying rate volatility. Additionally, we propose raising the borrow APR at the kink by 10 bps to compensate WETH suppliers with an additional 15 bps increase in supply APRs for the increased risk associated with higher utilization.
Recommended WETH IR Curve
Projected APRs for WETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 0.9 | 0.77 |
| 100 | 80.9 | 76.9 |
Current APRs for WETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 0.8 | 0.54 |
| 100 | 84.8 | 72 |
Optimism
Simple Summary
A proposal to adjust 8 risk parameter:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| WETH Collateral Factor | 81% | 83% |
| cbETH Collateral Factor | 78% | 81% |
| wstETH Collateral Factor | 78% | 81% |
| rETH Collateral Factor | 78% | 81% |
| WBTC Reserve Factor | 40% | 60% |
| WBTC Collateral Factor | 67% | 60% |
| WBTC Supply Cap | 25 | 10 |
| WBTC Borrow Cap | 4 | 0.5 |
IR Parameters
A proposal to adjust IR parameters for WETH
| WETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.8 | 0.9 |
| Multiplier | 0.01 | 0.01 |
| Jump Multiplier | 4.2 | 8 |
Rationale
Collateral Factors
Based on the supply-borrow distribution of users, we recommend aligning the collateral factors for WETH and LSTs(wstETH, rETH, cbETH) to those on Base. The current supply-borrow positions on Optimism reflect similar distribution to that of Base as discussed in the previous monthly recommendation.
We also recommend further reducing the collateral factor for WBTC from 67% to 60%, in line with previous risk-off measures. The decrease in collateral factor will not incur any liquidations of user positions.
IR Parameters
We recommend the following changes to the WETH interest rate curve, aligning it with the levels proposed for the Base WETH instance, for the same reasons outlined above.
Recommended WETH IR Curve
Projected APRs for WETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 0.9 | 0.77 |
| 100 | 80.9 | 76.9 |
Current APRs for WETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 0.8 | 0.54 |
| 100 | 84.8 | 72 |
Reserve Factor
Along with scaling down supply and borrow caps for WBTC, as discussed in the most recent monthly recommendation, WBTC’s reserve factor will be set at 60%.
Moonbeam
Simple Summary
A proposal to adjust 6 total risk parameters:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| xcUSDC Borrow Cap | 230,000 | 750,000 |
| xcUSDT Borrow Cap | 400,000 | 750,000 |
| USDC.wh Collateral Factor | 50% | 45% |
| WETH.wh Collateral Factor | 43% | 41% |
| WBTC.wh Collateral Factor | 25% | 20% |
| WBTC.wh Reserve Factor | 40% | 60% |
Rationale
Risk Parameters
Cap Recommendations
With increasing on-chain supply and growing liquidity on Moonbeam, we recommend increasing borrow caps for both xcUSDC (230,00 → 750,000) and xcUSDT (400,000 → 750,000). The increase in liquidity on stellaswap has mostly coalesced in stablecoin pools and therefore we don’t recommend any risk-on measures across other assets as liquidity has relatively remained unchanged for non-stablecoins.
Collateral Factor
We continue recommending a reduction in Collateral Factors across all Wormhole assets i.e. USDC.wh (50% → 45%), WETH.wh(43% → 41%), WBTC.wh (25% → 20%). The proposed reduction in CF liquidate the following positions supplying USDC.wh :
| Address | Supply Balance (USD) | Borrow Balance (USD) | Health Factor | Adjusted Health Factor |
|---|---|---|---|---|
| 0xb28662425e6a01e68e6d8ef6635c1b90311a9401 | 71.343194368 | 34.26 | 1.040943 | 0.936848 |
Reserve Factors
As mentioned in the most recent monthly recommendation, the reserve factors for WBTC.wh will be increased to 60%.
Moonriver
Simple Summary
Gauntlet suggest no changes in risk parameters for Moonwell Moonriver.
Risk Dashboard
The community should use Gauntlet’s Moonwell Base Risk Dashboard to better understand the updated parameter suggestions and general market risk in Moonwell BASE.
Quick Links
Please click below to learn about our methodologies:
Gauntlet Parameter Recommendation MethodologyGauntlet Model Methodology
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Methodology
This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets.
Gauntlet’s parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. Parameter recommendations seek to optimize for this objective function. Our agent-based simulations use a wide array of varied input data that changes on a daily basis (including but not limited to asset volatility, asset correlation, asset collateral usage, DEX / CEX liquidity, trading volume, expected market impact of trades, and liquidator behavior). Gauntlet’s simulations tease out complex relationships between these inputs that cannot be simply expressed as heuristics. As such, the input metrics we show below can help understand why some of the param recs have been made but should not be taken as the only reason for recommendation. To learn more about our methodologies, please see the Helpful Links section at the bottom.