Base Recommendations
Simple Summary
Risk Parameters
A proposal to adjust 6 risk parameters:
Risk Parameter | Current Value | Recommended Value |
---|---|---|
cbETH Borrow Cap | 2,100 | 2,520 |
wstETH Borrow Cap | 1,250 | 1,750 |
rETH Borrow Cap | 250 | 350 |
USDbC Supply Cap | 5,000,000 | 1,000,000 |
USDbC Borrow Cap | 4,000,000 | 750,000 |
AERO CF | 0% | 65% |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust cbETH, wstETH and rETH’s IR curve:
cbETH IR Parameters | Current | Recommended |
---|---|---|
Base | 0 | 0 |
Kink | 0.45 | 0.35 |
Multiplier | 0.05 | 0.075 |
Jump Multiplier | 3 | 3.5 |
wstETH IR Parameters | Current | Recommended |
---|---|---|
Base | 0 | 0 |
Kink | 0.45 | 0.35 |
Multiplier | 0.07 | 0.075 |
Jump Multiplier | 3.15 | 3.5 |
rETH IR Parameters | Current | Recommended |
---|---|---|
Base | 0 | 0 |
Kink | 0.45 | 0.35 |
Multiplier | 0.07 | 0.075 |
Jump Multiplier | 3.15 | 3.5 |
Rationale:
Risk Parameters
Gauntlet recommends increasing supply caps for cbETH and borrow caps for wstETH, rETH. Gauntlet also recommends making changes to uOptimal for LSTs as well as DAI and USDbC to improve capital efficiency.
Cap Recommendations
Gauntlet suggests implementing a comprehensive adjustment to borrow caps across both LSTs and USDbC to optimize protocol performance and mitigate risks. This includes:
-
wstETH - In accordance with Gauntlet’s methodology for managing parameters, we propose scaling up the borrow caps for wstETH (1,250->1,750). Among the top three positions, two are leveraging stablecoins against their LST/WETH collateral. These two positions exhibit health factors of 1.7 and 2.02, respectively, whereas the remaining positions are leveraging correlated assets. This adjustment aims to optimize the system by aligning borrow caps with the reduction of the kink (45%->35%). At maximum utilization, the borrow cap should reach 35% of the maximum supply cap, while the introduction of a high slope 2 in this context leads to higher Annual Percentage Rates (APRs), which helps to ensure that utilization remains at the 35% uOptimal threshold. Additionally, previous increases in Reserve Factors contribute to maintaining a balanced approach between capital efficiency and risk management.
wstETH
-
cbETH - In accordance with Gauntlet’s methodology for managing parameters, we propose scaling up the borrow caps for wstETH (2,100->2,520). All cbETH postions are either employing correlated/recursive strategies or are only supplying assets. This adjustment aims to optimize the system by aligning borrow caps with the reduction of the kink (45%->35%). At maximum utilization, the borrow cap should reach 35% of the maximum supply cap, while the introduction of a high slope 2 in this context leads to higher Annual Percentage Rates (APRs), which help to ensure that utilization remains at the 35% uOptimal threshold. Additionally, previous increases in Reserve Factors contribute to maintaining a balanced approach between capital efficiency and risk management.
cbETH
-
rETH - In accordance with Gauntlet’s methodology for managing parameters, we propose scaling up the borrow caps for wstETH (250->350). 3 positions in the top 10 are borrowing stables against their rETH/Correlated asset collateral, while the rest are borrowing recursively and 3 positions are only supplying. This adjustment aims to optimize the system by aligning borrow caps with the reduction of the kink (45%->35%). At maximum utilization, the borrow cap should reach 35% of the maximum supply cap, while the introduction of a high slope 2 in this context leads to higher Annual Percentage Rates (APRs), which help to ensure that utilization remains at the 35% uOptimal threshold. Additionally, previous increases in Reserve Factors contribute to maintaining a balanced approach between capital efficiency and risk management.
rETH
-
USDbC - Adjusting USDbC supply (5,000,000 → 1,000,000) and borrow caps (4,000,000 → 750,000) based on current market demand for USDbC, this move further supports the migration of USDbC in favor of USDC. Currently all positions are either employing recursive strategies or are only supplying collateral. The caps are structured to ensure that at maximum cap utilization, they revert to the 70% uOptimal level.
USDbC
AERO Collateral Factor
Over the last 60 days, AERO has experienced minimum daily log returns of -26.6%. We use the minimum daily log returns as a reference point for establishing the Collateral Factor (CF), suggesting a maximum CF of approximately ~75%. However, to exercise caution, we propose a CF of 65% to provide additional buffer. Gauntlet will continue to monitor market demand and liquidity for this asset and propose CF changes accordingly
BASE Circulating Tokens and Supply Cap
Asset | Borrow Cap | Supply Cap | Borrow Cap Usage | Supply Cap Usage | DEX 25pct Slippage Token | DEX 25pct Slippage USD |
---|---|---|---|---|---|---|
cbETH | 2,100 | 7,200 | 56.39% | 76.97% | 1,151 | $4,009,302.91 |
WETH | 28,000 | 40,000 | 70.40% | 73.08% | 1,405 | $4,585,722.67 |
USDC | 52,000,000 | 56,000,000 | 58.48% | 63.28% | 10,561,490 | $10,561,490.15 |
DAI | 1,500,000 | 2,000,000 | 62.65% | 69.74% | 444,533 | $444,544.53 |
wstETH | 1,250 | 4,000 | 47.78% | 89.51% | 869 | $3,301,567.27 |
USDbC | 4,000,000 | 5,000,000 | 5.69% | 7.56% | 8,425,115 | $8,425,114.86 |
rETH | 250 | 1,000 | 93.82% | 91.37% | 586 | $2,105,074.14 |
IR Parameters
LST IR Parameters
We recommend reducing kink from 45% to 35% based on the prevailing 30D utilization for all LST assets (cbETH, wstETH, rETH). Although the proposed kink reduction is still higher than market utilization, Gauntlet will monitor the market further to make any further changes to kink.
Demand for LST borrowing
Utilization for LST assets have consistently remained below the current kink (45%). The suggested reduction in kink will increase capital efficiency. This recommendation further bolsters protocol growth, with previous increases in supply caps for rETH, wstETH and cbETH and setting the borrow cap higher than current at 35% of the new supply cap. Additionally, it proposes adjusting the interest rate to target an optimal kink at 35%.
Increasing the borrowing capacity will enhance collateral yield, triggering further supply. This reduction of kink along with increased slope1 and slope2 can facilitate higher borrow caps while balancing risk. Furthemore, this move could also potentially incentivize WETH borrowing.
Gauntlet will continue to monitor borrow rates across the market and utilization on Moonwell to further adjust IR parameters.
Recommended LST IR Curve
Projected APRs for cbETH, wstETH and rETH
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 6.03 | 4.61 |
100 | 95.94 | 81.54 |
Current APRs for wstETH and rETH
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 5.19 | 3.53 |
100 | 99.95 | 74.96 |
Current APRs for wstETH and rETH
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 5.19 | 3.53 |
100 | 99.95 | 74.96 |
Gauntlet will monitor the utilization of cbETH, wstETH and rETH and consider additional actions if necessary.
Moonbeam Recommendations
Simple Summary
A proposal to adjust 7 total risk parameters:
Parameter | Current Value | Recommended Value |
---|---|---|
USDC.wh Borrow Cap | 2,400,000 | 1,800,000 |
xcUSDT Reserve Factor | 25% | 30% |
xcUSDC Reserve Factor | 25% | 30% |
USDC.wh Reserve Factor | 25% | 30% |
USDC.wh Collateral Factor | 62% | 59% |
WBTC.wh Collateral Factor | 35% | 32% |
ETH.wh Collateral Factor | 52% | 49% |
A proposal to make a IR curve adjustments for USDC.wh:
USDC.wh IR Parameters | Current | Recommended |
---|---|---|
BASE | 0 | 0 |
Kink | 0.8 | 0.75 |
Multiplier | 0.0875 | 0.11 |
Jump Multiplier | 7.4 | 7.4 |
A proposal to make an IR curve adjustments for xcUSDC:
xcUSDC IR Parameters | Current | Recommended |
---|---|---|
BASE | 0 | 0 |
Kink | 0.8 | 0.75 |
Multiplier | 0.0875 | 0.11 |
Jump Multiplier | 7.4 | 7.4 |
A proposal to make a IR curve adjustments for xcUSDT:
xcUSDT IR Parameters | Current | Recommended |
---|---|---|
BASE | 0 | 0 |
Kink | 0.8 | 0.75 |
Multiplier | 0.0875 | 0.11 |
Jump Multiplier | 7.4 | 7.4 |
A proposal to make an IR curve adjustments for FRAX:
FRAX IR Parameters | Current | Recommended |
---|---|---|
BASE | 0 | 0 |
Kink | 0.8 | 0.75 |
Multiplier | 0.0563 | 0.11 |
Jump Multiplier | 4 | 7.4 |
Rationale
Risk Parameters
Gauntlet recommends reducing collateral factor for wormhole assets while increasing Reserve Factor for stablecoins to boost reserves. It is also recommended to reduce borrow caps for USDC.wh due to low utilization and in the interest of capping the risk to the protocol.
USDC.wh Borrow Caps
The liquidity for USDC.wh has consistently remained below 30%, indicating that the borrow caps are set higher than the current utilization levels. Gauntlet suggests reducing the borrow caps for these USDC.wh to effectively manage and limit risk exposure.
USDC.wh Liquidity
Collateral Factor for Wormhole assets
With degrading liquidity on-chain as well as risks associated with bridged assets, Gauntlet recommends reducing CFs for all wormhole assets to cap risk to the protocol. The reduction in CFs will only incur 1 liquidation:
address | supply_balance | supply_balance_usd | borrow_balance | borrow_balance_usd | borrowing_power_usd | collateral_usd | borrow_usage | collateralization_ratio | health_factor |
---|---|---|---|---|---|---|---|---|---|
Address | 105.9 | 105.9 | 65.5 | 65.5 | 65.6 | 105.9 | 1.0 | 1.6 | 1.0 |
xcUSDC, USDC.wh and xcUSDT Reserve Factor
An increase in reserve factor for xcUSDC and xcUSDT will boost projected annual reserves by $14,442 while incentivizing more organic borrowing over recursive borrowing. Gauntlet will monitor this market to see the impact of reserve factor on current user positions.
IR Parameters
Utilization for stablecoin assets have remained under control since the previous recs where utilization remained above kink for sustained periods. To continue fine-tuning stablecoin utilization keeping circulating supply and liquidity in mind, Gauntlet recommends to lower kink while increasing Multiplier and Jump Mulitplier for the USDC.wh, xcUSDT and xcUSDC. The Mulitplier will move borrow APR at kink by ~125bps. Post the succses of MIP-M22, we continue to assess market demand for FRAX, although on-chain liquidity is extremely low, the existing FRAX bridge could potentially seed the market by bringing more FRAX on-chain. Gauntlet recommends adjusting slope 1, slope 2 and kink to same values as other stablecoin assets in the market, however, the reserve factor would remain at 15% to further incentivize supplying FRAX.
Gauntlet will monitor the impact of these adjustments and make any further adjustments if necessary to maintain utlization closer to the kink.
USDC.wh and xcUSDT utilization
xcUSDC utilization
USDC.wh
IR Curve for USDC.wh
Recommended Borrow and Supply APR for USDC.wh
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 8.25 | 4.33 |
100 | 193.25 | 135.27 |
Current Borrow & Supply APR for USDC.wh
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 7 | 4.2 |
100 | 155 | 116 |
xcUSDC
IR Curve for xcUSDC
Recommended Borrow and Supply APR for xcUSDC
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 8.25 | 4.33 |
100 | 193.25 | 135.27 |
Current Borrow & Supply APR for xcUSDC
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 7 | 4.2 |
100 | 155 | 116 |
xcUSDT
IR Curve for xcUSDT
Recommended Borrow and Supply APR for xcUSDT
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 8.25 | 4.33 |
100 | 193.25 | 135.27 |
Current Borrow & Supply APR for xcUSDT
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 7 | 4.2 |
100 | 155 | 116 |
FRAX
IR Curve for FRAX
Recommended Borrow and Supply APR for FRAX
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
80 | 8.25 | 5.25 |
100 | 84.5 | 71.82 |
Current Borrow & Supply APR for FRAX
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
80 | 4.5 | 3.0 |
100 | 84.5 | 71.82 |
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 5 total risk parameter:
Parameter | Current Value | Recommended Value |
---|---|---|
WMOVR Reserve Factor | 25% | 35% |
xcKSM Reserve Factor | 25% | 35% |
FRAX Reserve Factor | 25% | 35% |
FRAX Collateral Factor | 53% | 50% |
FRAX Borrow Cap | 270,000 | 200,000 |
A proposal to make an IR curve adjustments for FRAX and xcKSM:
FRAX IR Parameters | Current | Recommended |
---|---|---|
BASE | 0 | 0 |
Kink | 0.8 | 0.8 |
Multiplier | 0.0875 | 0.08 |
Jump Multiplier | 7.4 | 7 |
xcKSM IR Parameters | Current | Recommended |
---|---|---|
BASE | 0.02 | 0.02 |
Kink | 0.6 | 0.45 |
Multiplier | 0.15 | 0.2 |
Jump Multiplier | 3 | 3.5 |
Rationale:
WMOVR Liquidity
xcKSM Liquidity
FRAX Liquidity
The overall liquidity on Moonriver ecosystem has been on a consitent decline. The deterioration of liquidity for WMOVR, xcKSM and FRAX call for more conservative parameters with increase in Reserve Factors, reduction in Collateral Factors(where possible), Borrow caps and more aggresive IR increases. Since the current borrow cap for FRAX is 2x that of amount borrowed, we recommended reducing caps 200k.
IR Parameters
FRAX utilization continues to be consistently high over extended periods, largely due to the accumulation of interest on longstanding positions. Gauntlet suggests reducing slope 1 to establish a borrowing APR of 7% at the kink point, while setting a supply APR of 4.2%. This adjustment aims to reduce interest on longstanding debt positions.
Recommended FRAX IR Curve
Projected APRs
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
80 | 6.4 | 3.3 |
100 | 169.6 | 110.24 |
Current APRs
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
80 | 7 | 4.2 |
100 | 155 | 116.24 |
Recommended xcKSM IR Curve
xcKSM’s utilization has been under the kink (<60%) for elongated periods, therefore we recommend reducing kink from 60% to 35% (Closer to current utilization rates) to improve capital efficiency as well reducing risk. Increasing slope1 and slope2 helps keep utilization low under the current liquidity circumstances as well help bolster protocol reserves.
Projected APRs
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 2 | 0 |
35 | 11 | 3.21 |
100 | 203 | 132.27 |
Current APRs
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 2 | 0 |
60 | 11 | 4.95 |
100 | 131 | 98.24 |
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 not shown improvement since our last reccomendation cycle. We recommend to continue monitoring the Moonriver market and ecosystem.
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…
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.
Quick Links
Please click below to learn about our methodologies:
Gauntlet Parameter Recommendation Methodology
Gauntlet Model Methodology
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