Base Recommendations
Simple Summary
Risk Parameters
A proposal to adjust 12 risk parameters:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| wstETH Reserve Factor | 25% | 30% |
| rETH Reserve Factor | 25% | 30% |
| cbETH Reserve Factor | 25% | 30% |
| DAI Reserve Factor | 15% | 20% |
| wETH Supply Cap | 10,500 | 12,500 |
| wETH Borrow Cap | 8000 | 10,500 |
| DAI Supply Cap | 4,500,000 | 2,500,000 |
| DAI Borrow Cap | 3,900,000 | 2,000,000 |
| rETH Supply Cap | 600 | 700 |
| wstETH Supply Cap | 1600 | 1800 |
| wstETH Borrow Cap | 700 | 800 |
| USDC Borrow Cap | 10,000,000 | 12,000,000 |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust wETH’s IR curve:
| wETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0.01 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.037 | 0.032 |
| Jump Multiplier | 4.8 | 4.2 |
A proposal to adjust DAI’s IR curve:
| DAI IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.8 | 0.75 |
| Multiplier | 0.05 | 0.067 |
| Jump Multiplier | 8.6 | 9.0 |
Rationale:
Risk Parameters
Based on simulation results, Gauntlet recommends increasing caps for wETH, and decreasing caps for DAI. Gauntlet also recommends increasing reserve factor for DAI as well as staked ETH asssets cbETH, rETH, and wstETH in order to manage concentration risk (for DAI), improve capital efficiency and increase reserves for the protocol.
Reserve Factor Recommendations
Gauntlet suggests raising Reserve Factors for all Ethereum-based LSTs to bolster reserves within the protocol while minimizing the impact on users’ supply APY. This adjustment aims to deter repetitive leveraging behavior with the same asset by diminishing looping leverage yields, while concurrently encouraging borrowing of Wrapped Ethereum (wETH) to stimulate organic LST borrowing.
Top wstETH Supply Accts
Out of the top 10, 3 suppliers are not incurring any debt, and the rest are borrowing correlated assets. The largest supplier has supplied both stables and correlated ETH assets and has borrowed the same. The increase in Reserve Factor will help Moonwell boost more reserves while not impacting current APYs. Gauntlet will continue to montior the top positions.
Top rETH Supply Accts
Out of the top 10, 3 suppliers are not incurring any debt. The largest supplier is borrowing recursively, and the rest of the suppliers are borrowing correlated assets except for 1 position. Gauntlet will continue to monitor these positions to further optimize capital efficiency and reduce risk.
Top cbETH Supply Accts
The largest supplier has supplied ETH related assets and stables to borrow the same. The rest of the suppliers are using correlated borrows or recursive strategies. The increase in Reserve Factor continues to keep these strategies competitive while increasing reserves for the protocol.
Cap Recommendations
Gauntlet suggests implementing a comprehensive adjustment to supply and borrow caps across various assets to optimize protocol performance and mitigate risks. This includes:
-
rETH - Increasing supply caps for rETH to 700 from 600, since rETH has consistently utilized over 75% of it’s supply cap. The rising circulation of rETH, driven by enhanced on-chain liquidity, necessitates a proactive adjustment.
-
wstETH - Scaling up both supply (1600 → 1800) and borrow caps (700 → 800) for wstETH, aligning with Gauntlet’s methodology for managing these parameters.
-
wETH - Adjusting wETH supply (10,500 → 12,500) and borrow caps (8000 → 10,500) on Base to accommodate growing supply and borrow balances, at the back of growing liquidity conditions.
-
USDC - Raising USDC Borrow caps to 12,000,000, leveraging Gauntlet’s Supply and Borrow Cap Methodology to optimize the protocol’s borrowing capacity.
-
DAI - Considering a reduction in both supply (4.5M → 2.5M) and borrow caps (3.8M → 2M) for DAI on Base, reflecting the diminishing supply of DAI within the protocol and aligning with previous proposals aimed at maintaining equilibrium.
BASE Liquidity
| Asset | Borrow Cap | Supply Cap | Borrow Cap Usage | Supply Cap Usage | DEX 25pct Slippage Token | DEX 25pct Slippage USD |
|---|---|---|---|---|---|---|
| USDC | 10,000,000 | 15,000,000 | 67.14% | 55.45% | 6,799,632 | $6,799,721.56 |
| cbETH | 1,800 | 6,000 | 45.98% | 60.92% | 791 | $2,610,359.40 |
| rETH | 200 | 600 | 52.70% | 90.52% | 402 | $1,375,513.53 |
| WSTETH | 700 | 1,600 | 68.77% | 70.72% | 618 | $2,226,290.09 |
| DAI | 3,900,000 | 4,500,000 | 60.92% | 66.11% | 475,477 | $475,266.01 |
| USDbC | 4,000,000 | 5,000,000 | 10.35% | 11.65% | 4,250,978 | $4,251,034.49 |
| WETH | 8,000 | 10,500 | 73.81% | 74.70% | 1,237 | $3,852,442.05 |
BASE Circulating Tokens and Supply Cap (Change)
| Asset | Circulating Supply Tokens | Supply Cap | Supply Cap / Circulating Supply Cap (%) | Supply Balance |
|---|---|---|---|---|
| cbETH | 16,855 | 6,000 | 35.62 | $8,592,987.00 |
| WETH | 37,227.08 | 10,500 | 28.22 | $24,894,661 |
| DAI | 3,082,720 | 4,500,000 | 146.04 | $3,356,845.9873 |
| USDC | 214,809,112 | 15,000,000 | 6.99 | $8,373,737.8111 |
| rETH | 986 | 600 | 60.85 | $1,897,387.00 |
| wstETH | 3,796 | 1,600 | 42.18 | $4,165,794.00 |
| USDbC | 54,079,918 | 5,000,000 | 9.25 | $704578.6478 |
IR Parameters
wETH IR Parameters
Utilization rates for wETH has been below the kink following a drop in utilization post Feb 12th.
wETH Utilization
Link to chart
Gauntlet intends to lower the Borrowing rate in order to promote more borrowing of wETH and generate further reserves for the protocol. This aligns with the community’s strategy to foster the organic influx of LSTs, aiming to enhance LST recursive strategies within the protocol.
Recommended wETH IR Curve
Projected APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 2.48 | 1.48 |
| 100 | 86.48 | 64.86 |
Current APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0.99 | 0 |
| 80 | 3.95 | 2.37 |
| 100 | 99.95 | 74.96 |
Gauntlet will monitor the utilization of wETH and consider additional actions if levels remain below kink.
DAI IR Parameters
DAI Utilization
With decreasing DAI circulating supply on-chain, Gauntlet recommends to reduce utilization at current levels along in tandem with a decrease in caps.
DAI Circulating Supply
DAI Utilization
Link to chart
Recommended DAI IR Curve
Projected APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 75 | 5.02 | 3.01 |
| 100 | 230.02 | 184.02 |
Current APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 3.99 | 2.71 |
| 100 | 175.99 | 149.59 |
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.
Moonbeam Recommendations
Simple Summary
A proposal to adjust 6 total risk parameters:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| USDC.wh Reserve Factor | 20% | 25% |
| WGLMR Reserve Factor | 25% | 30% |
| xcUSDC Collateral Factor | 0% | 10% |
| USDC.wh Collateral Factor | 64% | 62% |
| xcDOT Collateral Factor | 56% | 55% |
| WGLMR Collateral Factor | 60% | 58% |
A proposal to make a IR curve adjustments for USDC.wh:
| USDC.wh IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.0814 | 0.0845 |
| Jump Multiplier | 7.0 | 7.2 |
Rationale
Risk Parameters
Based on simulation results, Gauntlet recommends decreasing the collateral factors for xcDOT,USDC.wh and WGLMR in order to mitigate risk to the protocol. It is also recommended to increase Collateral Factor for xcUSDC to kick-start a phased approach to xcUSDC collateral enablement. Gauntlet recommends an increase in Reserve Factors for USDC.wh and WGLMR to boost protocol reserves while balancing capital inflows. The parameters for WBTC.wh, xcUSDT,and WETH.wh effectively balance risk with capital efficiency.
xcDOT Top Supply Positions
4 out 10 of the top suppliers of xcDOT have no borrows and the rest of the positions have borrow usage below 55%. Most of the top suppliers are borrowing stables against their collateral. Gauntlet recommends decreasing the collateral factor for xcDOT from 56% to 55% to cap risk. This decrease to collateral factor should not impact any users or cause any liquidations. Furthermore, the decrease in Collateral Factor suggested in the last recommendation cycle had no negative impact on supply inflows for xcDOT where the supply has instead grown organically.
WGLMR Top Supply Positions
Only 1 out of the top 10 Suppliers have any borrow positions. Furthermore, the top 10 have borrow usage lower than 58%.
The reduction of collateral factor from 60% to 58% only liquidates 1 user with less than $5 supplied liquidated. Gauntlet recommends to reduce Collateral Factor to 58%.
| supply_balance_usd | borrow_balance_usd | collateral_usd | borrow_usage | collateralization_ratio | health_factor | adjusted_health_factor | |
|---|---|---|---|---|---|---|---|
| Address | 4.64 | 2.77 | 4.64 | 0.99 | 1.67 | 1.003 | 0.95 |
Similar to xcDOT, the decrease in collateral factor in the last recommendation cycle had no influence on reducing supply balance for WGLMR. We believe this behaviour will continue to follow post the current decrease in collateral factors.
Increase in Reserve Factor will boost projected annual reserves by $7,967 to $47,805 without impacting the supply APY which is part contributed by incentives. Gauntlet will continue to monitor supply positions.
xcUSDC Collateral Factor
xcUSDC has a total on-chain liquidity of $111,000 and a supply of over $192,000. The xcUSDC is redeemable for USDC across any chain via Circle’s APIs and Circle’s Mint platform. As such, liquidators can transfer to other parachains on Polkadot via the Polkadot Asset Hub (Has $13.1M in Supply), but will have to create an API via Circle to transfer to other chains. Given the current friction involved to transfer USDC across chains and on-chain liquidity, Gauntlet recommends capping Collateral Factor at 10%. Gauntlet will monitor on-chain liquidity to further make any changes and will a phased approach to increase the collateral factor.
USDC.wh Reserve Factor and Collateral Factor
Out of the top 10 suppliers for USDC.wh, only 3 positions are borrowing against the collateral with usage below 62%. Gauntlet recommends decreasing collateral factor for USDC.wh to 62% from the current 64%. The decrease in collateral factor will not liquidate any positions on the protocol. An increase in reserve factor for USDC.wh will boost projected annual reserves by $8,116 to $40,814. Furthermore, the increase in reserve factor will further disincentivize recursive behaviour of USDC borrowers. Gauntlet will monitor this market to see the impact of reserve factor on current supply positions.
Moonbeam Liquidity
As we make recommendations through our risk models, we keep a constant check on the market liquidity and concentration risk to the Moonbeam protocol. In this regard, we would like to present some key liquidity figures for Moonbeam assets to share with the community. Since our last post, liquidity has decreased across all listed assets.
| Asset | Borrow Cap Relative to Supply | Total Circulating Supply | 25% Depth Token | 25% Depth USD |
|---|---|---|---|---|
| WETH.wh | 0.08% | 2,325.78 | 18 | $42,918 |
| USDC.wh | 51% | 2,993,119 | 125,000 | $125,000 |
| WBTC.wh | 0.04% | 183.57 | 0.1 | $5,570 |
| xcUSDT | 70.5% | 976,127 | 125,000 | $125,000 |
| xcUSDC | 136% | 196,765 | 125,000 | $125,000 |
| xcDOT | 91% | 1,037,592 | 21,000 | $131,390 |
| FRAX | 100% | 5,319,872 | 140,000 | $140,000 |
| WGLMR | 60.6% | 10,332,424 | 390,000 | $131,564 |
IR Parameters
USDC.wh
Since last reccomendations, borrow rates and utilization for stablecoin assets continue to be less volatile and more closer to kink, however, utilization has still managed to spill over the kink often. In order to further assess market equillibrium/efficiency and further curb high utilization Gauntlet recommends to increase Multiplier and Jump Mulitplier for the USDC.wh. The Mulitplier will move borrow APR at kink by 25bps. Gauntlet will monitor the impact of these adjustments and make any further adjustments if necessary to maintain utlization closer to the kink.
IR Curve for USDC.wh
Recommended Borrow & Supply APR for USDC.wh
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 6.76 | 3.78 |
| 100 | 150.76 | 105.32 |
Current Borrow and Supply APR for USDC.wh
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 6.51 | 4.16 |
| 100 | 146 | 117.2 |
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.
BUSD-USDC price feed deprecation
Chainlink has informed Moonwell contributors of their plans to deprecate the BUSD-USD price feed on the Moonbeam network. This follows the asset being de-listed by the asset issuer in 2023. Currently, the BUSD market on Moonwell is in a deprecated status with supplying, collateral and borrows disabled. Suppliers may still withdraw their supplied BUSD if they wish.
When the price feed is deprecated by Chainlink, calls to latestRoundData will revert, which might cause unexpected results and prevent users from interacting with this market, even to withdraw supplied BUSD. For this reason, Moonwell contributors are recommending that the price feed for BUSD be hardcoded to $1 to prevent calls from reverting.
Supporting Data
Moonbeam 2% Market Depth for non-Stables
Risk Dashboard
The community should use Gauntlet’s Moonbeam Risk Dashboard to better understand the updated parameter suggestions and general market risk in Moonbeam.
VaR (Value at Risk) is defined as the expected insolvent amount (defined as excess debt relative to collaterals for any account) in a given day for a protocol under extremely adverse market conditions. We use our models to pre-configure specific risky market scenarios and stress test protocols via simulations leveraging current user positions, asset prices, and varied liquidity conditions. VaR is an estimate of the expected insolvencies for a single day given a severe correlated market downturn.
LaR is calculated as the expected liquidation amount under extremely adverse market conditions. It represents our estimation on what would happen if the market crashes, etc…
Moonriver recommendations
Simple Summary
A proposal to adjust 1 total risk parameter:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| FRAX Borrow Cap | 420,000 | 500,000 |
Rationale:
Supply & Borrow Balance USD
Link to Chart
Frax Borrow cap utilization has breached 90%. Although on-chain liquidity has not increased since the last recommendation cycle, given the robustness of FRAX bridge to other chains and sufficient liquidity on-chain to absorb large user liquidations, Gauntlet recommends increasing the caps to 560,000 FRAX from the current 420,000 FRAX.
FRAX Utilization
FRAX Liquidity on Solarbeam
FRAX Reserves
Moonriver On-chain Liquidity
In shaping our recommendations via our risk models, we consistently monitor market liquidity and concentration risks pertaining to the Moonriver protocol. We aim to provide the community with pivotal liquidity metrics for Moonriver assets. The liquidity on Moonriver has improved since our last reccomendation cycle, however we believe xcKSM and WMOVR caps are in-tune with the on-chain liquidity available and further risk-on measures are not warrented. We recommend to continue monitoring the Moonriver market and ecosystem.
Current Liquidity for Rec
| Asset | 10% Liquidity Depth (#) | 10% Liquidity Depth ($) | 25% Liquidity Depth | 25% Liquidity Depth ($) |
|---|---|---|---|---|
| WMOVR | 1800 | $37,796 | 5600 | $97,108 |
| xcKSM | 500 | $22,166 | 1500 | $55,423 |
| FRAX | 25000 | $25,000 | 75000 | $75,000 |
Previous Liquidity for Rec
| Asset | 10% Liquidity Depth (#) | 10% Liquidity Depth ($) | 25% Liquidity Depth | 25% Liquidity Depth ($) |
|---|---|---|---|---|
| WMOVR | 1650 | $39,072 | 5150 | $121,952 |
| xcKSM | 620 | $24,800 | 1800 | $72,000 |
| FRAX | 37900 | $37,900 | 95620 | $95,620 |
Current Rec Cycle Metrics
| Asset | Circulating Supply | Supply Balance | Supply Balance / Circulating Supply | Borrow Cap | Borrow Cap / Circulating Supply |
|---|---|---|---|---|---|
| WMOVR | 199,689 | 156,011 | 78.12% | 40,000 | 38.47% |
| xcKSM | 69,909 | 39,038 | 55.84% | 14,000 | 16.17% |
| FRAX | 5,450,958 | 538,778 | 9.88% | 500,000 | 5.50% |
Previous Rec Cycle Metrics
| Asset | Circulating Supply | Supply Balance | Supply Balance / Circulating Supply | Borrow Cap | Borrow Balance / Circulating Supply |
|---|---|---|---|---|---|
| WMOVR | 242,067 | 156922.95 | 64.83% | 40000 | 25.49% |
| xcKSM | 50,875 | 48024.29 | 94.40% | 14000 | 29.15% |
| FRAX | 5,450,958 | 870308.41 | 15.97% | 420000 | 48.26% |
The circulating supply on the Moonriver market appears to be well-balanced in relation to borrowing caps. Hence, Gauntlet doesn’t recommend any cap changes for the above assets.
IR Parameters
When Gauntlet analyzes interest rate parameters, we prioritize two main objectives:
- Mitigating the risk of reaching 100% utilization in a pool.
- Maximizing the growth of the protocol reserve to provide coverage for potential insolvencies or future expenses.
For this recommendation, Gauntlet advises against making any adjustments to the interest rate curves, as they are already optimized to achieve these objectives.
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.
Risk Dashboard
The community should use Gauntlet’s Moonriver Risk Dashboard to understand better the updated parameter suggestions and general market risk.
VaR (Value at Risk) is defined as the expected insolvent amount (defined as excess debt relative to collaterals for any account) in a given day for a protocol under extremely adverse market conditions. We use our models to pre-configure specific risky market scenarios and stress test protocols via simulations leveraging current user positions, asset prices, and varied liquidity conditions. VaR is an estimate of the expected insolvencies for a single day given a severe correlated market downturn.
LaR is calculated as the expected liquidation amount under extremely adverse market conditions. It represents our estimation on what would happen if the market crashes, etc…
Quick Links
Please click below to learn about our methodologies:
Gauntlet Parameter Recommendation Methodology
Gauntlet Model Methodology
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