# \[Gauntlet\] Moonwell Multichain Risk Parameter Recommendations **URL:** \ **Category:** Ideation & Discussion\ **Tags:** moonriver\ **Created:** [July 8, 2023, 1:10am UTC](https://forum.moonwell.fi/t/gauntlet-moonwell-multichain-risk-parameter-recommendations/532 "2023-07-08T01:10:16Z")\ **Posts on this page:** 7\ **Page:** 1
**Author:** ![delz](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/delz/32/453_2.png) [@delz](https://forum.moonwell.fi/u/delz)\ **Post date:** [July 8, 2023, 1:10am UTC](https://forum.moonwell.fi/t/gauntlet-moonwell-multichain-risk-parameter-recommendations/532/1 "2023-07-08T01:10:16Z")
Following the recent Multichain [incident](https://twitter.com/TheBlock__/status/1677374484863410206?s=20), Gauntlet aims to offer valuable guidance to the community on minimizing risk exposure to Multichain assets (USDC.multi, USDT.multi, ETH.multi, BTC.multi). Currently — - total non-multichain borrows collateralized by Multichain assets is less than $90k - additional supply and borrow of Multichain assets is disabled, additional borrow of non-Multichain assets is also disabled In order to mitigate potential risks associated with these assets, we recommend to safely deprecate these assets. We offer a **fast** deprecation plan (Option 1), or a more **iterative** deprecation plan (Option 2). **Gauntlet intends to proceed with Option 1 by proposing an MIP on Monday. We recommend faster deprecation in order to more quickly return the protocol back to normal operations, due to the inherent uncertainty in the Multichain bridge recovering.** However, if the community expresses interest in Option 2, we will initiate a snapshot vote to determine the preferred course of action between the two options. * * * ### General Recommendation Gauntlet recommends these actions no matter what option the community decides to move forward with. - **Continue to freeze borrowing and supply of Multichain assets.** This will prevent additional supply and borrow of compromised Multichain assets. - **Increase RF** : To incentivize users to withdrawal their multi-chain supply and close debt positions, we recommend increasing the reserve factor to (RF) 99%. | Risk Parameter Recs | USDC.multi | ETH.multi | USDT.multi | BTC.multi | | --- | --- | --- | --- | --- | | Reserve Factor | 15% → 99% | 25% → 99% | 15% → 99% | 25% → 99% | | Collateral Factor | 68% → 0% | 62% → 0% | 46% → 0% | 0% | - **Decrease Rewards** : Decrease borrow and supply rewards for MultiChain assets to 0. - **Unpause Transfers :** Combined with setting the CF to 0, this may reduce Apollo’s exposure to Multichain assets. * * * ### Option 1 - Fast deprecation **(Gauntlet recommended)** Gauntlet recommends to deprecate Multichain assets with the following levers below. - **Set CF to 0** : We recommend to set the collateral factor (CF) to 0 for all Multichain assets. This means that users will no longer be able to borrow against these assets and would be actionable for a forced liquidation. - **Reenable borrowing for non-multichain assets.** This returns normal functionality to non-multichain assets. | Number of Users | Borrow Balance USD | Supply Balance USD | Liquidatable Amount | Multichain Supply USD | Multichain Borrow USD | | --- | --- | --- | --- | --- | --- | | 125 | $743,306 | $1,311,901 | $691,394 | $1,218,326 | $657,377 | #### Total (both Multichain and non Multichain) supply balances (in market rate USD) against the loan to value of the account. ![Screen Shot 2023-07-07 at 4.07.38 PM](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/91a47d241149639ff0bb27a65c1bbfe66f66d3ba.png) \* High proportion of account balances on Apollo have LTV below 80% * * * ### Option 2 - Iterative deprecation The current status of the Multichain bridge is unclear, given that the market is currently pricing Multichain Assets at 20%-40% below native assets. Gauntlet cannot predict the likelihood that the bridge recovers. If the community wishes to more slowly reduce the protocol’s exposure to Multichain assets, then they may choose to lower Multichain assets collateral factors iteratively to 0 under the following framework, rather than immediately as in Option 1. - **Do not decrease collateral factors to 0 immediately but lower them periodically.** Gauntlet will devise a schedule to bring down Multichain assets’ CFs iteratively. - **Continue to freeze borrowing of both non-multichain assets and Multichain assets; continue to freeze supply of Multichain assets** | CF Decrease (Points) | Number of Users | Borrow Balance USD | Supply Balance USD | Liquidatable Amount | Multichain Supply USD | Multichain Borrow USD | | --- | --- | --- | --- | --- | --- | --- | | - 5% | 23 | $403,029 | $608,514 | $30,623 | $608,143 | $347,928 | | Asset | CF Changes | | --- | --- | | USDC.multi | 68% → 63% | | ETH.multi | 62% → 57% | | USDT.multi | 46% → 41% | ### Supporting Data The impact from the Multichain hack can be seen with Solarbeam’s swap data. As shown within the liquidity chart of MOVR/USDC, there was an initial spike in liquidity but eventually started towards a downward trend. #### MOVR/USDC Liquidity ![Untitled (54)](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/edfa846a3bec673eac11c98bfcb6c03aab011129.png) Pricing for USDC dropped precipitously initially during the depeg but has rebounded to .125. This is still 30% below market rate for USDC native to MOVR. ![Untitled (55)](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/e84c003950e8dd09dc2f26a1df1f45769eb7a0cf.png) * * * **Notes** - It’s important to note that the above steps provide a general framework for the deprecation plan. Depending on the specific circumstances and requirements of Multichain Assets, additional steps or modifications may be necessary. - In the event that the oracle associated with MultiChain assets is not reflecting accurate market price, it means that liquidations will not occur for market rate insolvent accounts. This is because the liquidated collateral would be worth less than the amount repaid. However, liquidations will still occur for market rate solvent accounts. ---
**Author:** ![WardenFinance](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/wardenfinance/32/427_2.png) [@WardenFinance](https://forum.moonwell.fi/u/WardenFinance)\ **Post date:** [July 10, 2023, 2:16pm UTC](https://forum.moonwell.fi/t/gauntlet-moonwell-multichain-risk-parameter-recommendations/532/2 "2023-07-10T14:16:38Z")
We are in favor of the recommendation to deprecate .multi markets using either option depending on community’s preference. Option 1 will certainly allow the protocol to unfreeze more rapidly, but will most likely cause more .multi positions to be liquidated than Option 2. The general framework of our recommended plan of action is very much in line with the proposed set of changes by Gauntlet. [[Warden] Multichain Hack - Proposed Recovery Plan](https://forum.moonwell.fi/t/warden-multichain-hack-proposed-recovery-plan/530) ---
**Author:** ![delz](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/delz/32/453_2.png) [@delz](https://forum.moonwell.fi/u/delz)\ **Post date:** [July 10, 2023, 8:11pm UTC](https://forum.moonwell.fi/t/gauntlet-moonwell-multichain-risk-parameter-recommendations/532/3 "2023-07-10T20:11:51Z")
### Multichain Market Risk Update 2023-07-10 Since posting these recommendations, we have seen a further decrease in Supply and Borrow positions on the protocol: ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/f76ef83b91a004ef8c6b11f860a59d815668c986.jpeg) Over the weekend, the Borrow Balances for Apollo as a whole decreased. However, it is worth noting that xcKSM witnessed an increase in the amount borrowed. The Borrow Pause Guardian was not fully executed until July 9th. In the interim, xcKSM borrows increased by $114k resulting in a potential bad debt of $170k for Apollo. ### Borrow Balance USD ![](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/86f7d650201113a84a7fc8aeec754271b907437e.png) ### 2% Depth Liquidity USDC.multi/WMOVR ![](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/11c01e5f5bd383cbf125d82615a1a76880dbdbba.png) ### Price Ratio WMOVR/USDC.multi ![](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/f3ccf78564f3f11bfbdfe159eb2e52b098e88fe7.png) USDC.multi pricing is still hovering around ~.12 for MOVR. This is a 50% premium compared to market rate for USDC native to MOVR. This is reflective of all multichain asset pricing within Solarbeam. Based on the community input within the Forums and discord channels, we will be moving forward with Option 1. We will be creating a MIP by EOD. ---
**Author:** ![delz](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/delz/32/453_2.png) [@delz](https://forum.moonwell.fi/u/delz)\ **Post date:** [July 11, 2023, 3:29am UTC](https://forum.moonwell.fi/t/gauntlet-moonwell-multichain-risk-parameter-recommendations/532/4 "2023-07-11T03:29:49Z")
MIP 60 Apollo Multichain Risk Parameter Recommendations [proposal](https://gov.moonwell.fi/apollo/proposal/29) has been added to governance. As of today, we expect the following impact to Apollo protocol if these CF recommendations are passed: Impacted Users: 102 Borrow Balance USD: $236,376 Supply Balance USD: $538,332 Liquidatable Amount: $183,064 Multichain Supply USD: $444,192 Multichain Borrow USD: $159,426 Gauntlet wants the community to be fully aware of the impact of this proposal on user liquidations and the potential of creating insolvent debt from `.multi` assets that we are estimating around ~$170k if users do not update their positions. ---
**Author:** ![delz](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/delz/32/453_2.png) [@delz](https://forum.moonwell.fi/u/delz)\ **Post date:** [July 12, 2023, 10:57pm UTC](https://forum.moonwell.fi/t/gauntlet-moonwell-multichain-risk-parameter-recommendations/532/5 "2023-07-12T22:57:31Z")
We want to notify the community that this [proposal](https://gov.moonwell.fi/apollo/proposal/29) has hit quorum and will close in ~24hrs. As of today, we expect the following impact to Apollo protocol when the CF recommendations are implemented: Impacted Users: 97 Borrow Balance USD: $204,479 Supply Balance USD: $464,493 Liquidatable Amount: $167,839 Multichain Supply USD: $397,711 Multichain Borrow USD: $140,138 ---
**Author:** ![delz](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/delz/32/453_2.png) [@delz](https://forum.moonwell.fi/u/delz)\ **Post date:** [July 13, 2023, 5:57pm UTC](https://forum.moonwell.fi/t/gauntlet-moonwell-multichain-risk-parameter-recommendations/532/6 "2023-07-13T17:57:10Z")
As of today, we expect the following impact to Apollo protocol when the CF recommendations are implemented: Impacted Users: 96 Borrow Balance USD: $197,759 Supply Balance USD: $461,523 Liquidatable Amount: $161,001 Multichain Supply USD: $393,217 Multichain Borrow USD: $134,159 We want to flag this account [0x978565840a231948a59d8816c6e091677767b985](https://debank.com/profile/0x978565840a231948a59d8816c6e091677767b985) that has already become liquidatable. This account has borrowed $111k xcKSM and USDC.multi collateral of 154k. ---
**Author:** ![delz](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/delz/32/453_2.png) [@delz](https://forum.moonwell.fi/u/delz)\ **Post date:** [July 14, 2023, 9:42pm UTC](https://forum.moonwell.fi/t/gauntlet-moonwell-multichain-risk-parameter-recommendations/532/7 "2023-07-14T21:42:40Z")
Proposal [MIP 60 - Apollo Multichain Risk Parameter Recommendations](https://gov.moonwell.fi/apollo/proposal/29) is ~7 hours from being executed. As of this moment, we expect the following impact on the Apollo protocol when the CF recommendations are implemented : Impacted Users: 92 Borrow Balance USD: $145,515 Supply Balance USD: $357,085 Liquidatable Amount: $128,697 Multichain Supply USD: $323,584 Multichain Borrow USD: $81,535