[Gauntlet] - Base/Optimism/Moonbeam/Moonriver Monthly Recommendations - 2024-10-23

Proposals
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Hi all, Boardroom here with a proposal summary. This month, Gauntlet’s recommendations address changes to Moonwell’s risk parameters on Base, Optimism, and Moonbeam:

  • Supply Caps: limits on how much money a user can supply to a certain market.
  • Borrow Caps: limits on how much money a user can borrow from a certain market.
  • Collateral Factors (CF): percentages that represent the maximum amount that can be borrowed against a specific asset in the protocol. For example, a 50% CF means the borrower would need to deposit $1,000 of collateral to borrow $500 in other assets.
  • Reserve Factors (RF): percentage of interest paid by borrowers that is allocated to the protocol’s reserves. It helps make sure the ecosystem remains stable and sustainable.
  • Interest Rate (IR) Parameters: Base, Multiplier, Kink, and Jump Multiplier. Base is the minimum interest rate that borrowers pay and lenders receive. Multiplier determines how steeply the IR increases with utilization rate. Kink is the point in the model in which the IR model changes slope. Jump Multiplier causes a jump in interest rates when the utilization rate surpasses the “Kink.”

Let’s look at a few examples from this month.

(1) The CF for DAI on Base was decreased from 82% to 80% while the RF was increased from 20% to 40%. This means that the maximum amount of DAI that can be borrowed is proportionally lower than last month, while the percentage of interest paid by DAI borrowers that is allocated to reserves is higher. Taken together, these indicate a gradual reduction to DAI exposure (due to a declining circulating supply of DAI on Base).

(2) A few IR parameters for USDbC on Base were adjusted. Its Base remains at 0, which is the minimum interest rate that borrowers pay. Its Kink has decreased from 0.7 to 0.6; at 0.6, the behavior of the IR curve changes. Below 0.6, the protocol encourages borrowing with lower rates. Above 0.6, additional borrowing is discouraged. Its Multiplier has decreased from 0.057 to 0.04. A lower Multiplier means that interest rates increase more slowly as the utilization rate approaches the Kink. Its Jump Multiplier decreased from 5.7 to 4. A lower Jump Multiplier means the jump in interest rates beyond the Kink will be slightly lower than last month, but the jump will still be significant.