Base Recommendations
Simple Summary
Risk Parameters
A proposal to adjust 5 risk parameters:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| WETH Supply Cap | 50,000 | 60,000 |
| wstETH Supply Cap | 5,000 | 6,300 |
| wstETH Borrow Cap | 1,750 | 2,400 |
| USDbC Supply Cap | 1,000,000 | 250,000 |
| USDbC Borrow Cap | 750,000 | 200,000 |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust WETH, USDC and AERO’s IR curve:
| WETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.032 | 0.02 |
| Jump Multiplier | 4.2 | 4.2 |
| USDC IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.067 | 0.061 |
| Jump Multiplier | 9 | 9 |
| AERO IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.45 | 0.45 |
| Multiplier | 0.07 | 0.145 |
| Jump Multiplier | 3.15 | 3.15 |
Rationale:
Risk Parameters
Gauntlet recommends increasing supply caps for WETH, and both supply and borrow caps for wstETH, on the other hand we recommend decreasing both supply and borrow caps for USDbC. Gauntlet also recommends making changes to borrow rates of WETH, USDC and AERO to reflect market rates.
Cap Recommendations
Gauntlet suggests implementing adjustments to supply and borrow caps across WETH and wstETH to optimize protocol performance and mitigate risks. This includes:
-
WETH - In accordance with Gauntlet’s methodology for managing parameters, we propose scaling up the supply caps for WETH (50,000->60,000). Of the top 10, three positions are borrowing USDC, with one position borrowing AERO. The rest of the positions are borrowing recursively. Additionally, previous increases in Reserve Factors contribute to maintaining a balanced approach between capital efficiency and risk management.
WETH
-
wstETH - We propose scaling up both supply caps (5,000->6,300) and borrow caps for wstETH (1,750->2,400). Of the top 10 positions, most users are borrowing recursively, however the largest suppliers are borrowing stables against their collateral. These positions are blended with other assets such as cbETH, WETH and USDC, Gauntlet will continue to monitor these positions. 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 be a little over 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
The above adjustment also takes into account the increasing on-chain liquidity for wstETH as show by the visualization below.
-
USDbC - Adjusting USDbC supply (1,000,000 → 250,000) and borrow caps (750,000 → 200,000) based on current market demand for USDbC, this move further supports the migration of USDbC in favor of USDC reflected by significant drop in supplies on Moonwell. 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. We would also like to note that we are willing to work with the community on the next steps with respect to USDbC.
USDbC
USDbC Supply on Moonwell
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 | 2,520 | 7,200 | 46.20% | 76.38% | 1,362 | $5,442,348.18 |
| rETH | 350 | 1,000 | 77.42% | 99.91% | 329 | $1,363,790.35 |
| DAI | 1,500,000 | 2,000,000 | 97.18% | 98.64% | 372,557 | $372,511.25 |
| WETH | 40,000 | 50,000 | 52.24% | 67.60% | 1,506 | $5,635,216.37 |
| wstETH | 1,750 | 5,000 | 47.26% | 93.72% | 1,255 | $5,479,090.09 |
| AERO | 8,000,000 | 12,000,000 | 63.52% | 63.94% | 3,891,867 | $4,446,457.92 |
| USDbC | 750,000 | 1,000,000 | 16.31% | 17.51% | 13,574,699 | $13,574,368.69 |
| USDC | 70,000,000 | 75,000,000 | 50.33% | 62.86% | 14,780,025 | $14,779,664.81 |
IR Parameters
After continously monitoring utilization and market rates for assets we recommend changes to borrow rates at kink for WETH, USDC and AERO to set rates closer to market and borrowing demand.
WETH IR Parameters
Utilization for WETH has consistently remained below the current kink (80%). This reflects that current borrow APR at kink is not reflecting true market rates. In this regard, we propose to reduce slope1 which would reduce APRs from 2.55% to 1.6%, a 95bps drop. The suggested reduction in borrow rates will increase capital efficiency and stimulate further borrowing.
Gauntlet will continue to monitor borrow rates across the market and utilization on Moonwell to further adjust IR parameters.
Recommended WETH IR Curve
Projected APRs for WETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 1.6 | 0.96 |
| 100 | 85.6 | 64.2 |
Current APRs for WETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 2.55 | 1.53 |
| 100 | 86.55 | 64.91 |
USDC IR Parameters
USDC utilization has continued to decline, falling below the kink level. This drop is largely due to the current borrow rates not aligning with the actual market rates. To stimulate borrowing activity on the platform, Gauntlet recommends reducing the borrow rates to ~5.5%.
Market-wide borrow rates have also decreased, with the DAI Savings Rate currently at 8%, down from a high of 15% in recent weeks. To maintain competitive borrowing rates, we recommend the following adjustments.
Recommended USDC IR Curve
Projected APRs for USDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 5.49 | 4.2 |
| 100 | 95.5 | 81.1 |
Current APRs for USDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 6.00 | 4.61 |
| 100 | 96.02 | 81.62 |
AERO IR Parameters
On the contrary, for AERO, utilization has been above kink for sustained periods of time. Gauntlet recommends increasing borrow APR to 6.5% to bring utilization closer to kink.
Recommended AERO IR Curve
Projected APRs for AERO
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 6.5 | 2.2 |
| 100 | 176.4 | 132.3 |
Current APRs for AERO
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 3.15 | 1.06 |
| 100 | 176.4 | 132.3 |
Gauntlet will monitor the utilization of WETH, USDC and AERO and consider additional actions if necessary.
Moonbeam Recommendations
Simple Summary
A proposal to adjust 12 total risk parameters:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| xcUSDC Borrow Cap | 560,000 | 230,000 |
| xcUSDT Borrow Cap | 800,000 | 400,000 |
| xcDOT Borrow Cap | 850,000 | 425,000 |
| FRAX Borrow Cap | 5,250,000 | 2,000,000 |
| BTC.wh Borrow Cap | 5 | 2.5 |
| WGLMR Reserve Factor | 30% | 35% |
| xcDOT Reserve Factor | 25% | 35% |
| BTC.wh Reserve Factor | 25% | 35% |
| ETH.wh Reserve Factor | 25% | 35% |
| ETH.wh Collateral Factor | 49% | 48% |
| WBTC.wh Collateral Factor | 32% | 31% |
| USDC.wh Collateral Factor | 59% | 58% |
A proposal to make an IR curve adjustments for xcUSDC:
| xcUSDC IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.75 | 0.65 |
| Multiplier | 0.11 | 0.14 |
| Jump Multiplier | 7.4 | 7.4 |
A proposal to make an IR curve adjustments for xcUSDT:
| xcUSDT IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.75 | 0.65 |
| Multiplier | 0.11 | 0.14 |
| 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 | 0.75 | 0.75 |
| Multiplier | 0.11 | 0.08 |
| Jump Multiplier | 7.4 | 7.4 |
Rationale
Risk Parameters
The current TVL on Moonbeam has mostly seen a downward trend with some increase in TVL lately, which hasn’t completely translated to better liquidity on-chain. Gauntlet advises a strategic adjustment involving the reduction of collateral factors across all wormhole assets, alongside a concurrent increase in Reserve Factor for WETH.wh, WBTC.wh, and xcDOT. This approach aims to mitigate protocol risk while fostering utilization closer to the kink . Additionally, Gauntlet proposes a reduction in borrow caps for xcUSDT, xcUSDC, and FRAX, as current levels exceed 40% of on-chain circulating supply. We also recommend reducing borrow cap for xcDOT and WBTC.wh due to low utilization and in the interest of capping the risk to the protocol.
Borrow Caps
On-chain circulating supply for xcUSDC, xcUSDT and FRAX have been on a downward trend with current cap accounting for >40% of the circulating supply. In order to mitigate concentration risk to the protocol, we recommend the following:
xcUSDC: In order to slowly taper the borrow cap we recommend to reduce the caps from 560,000→400,000 with further borrow cap reductions to follow. As most of the positions are recursive the actually borrows in this market is closer to ~140k vs a circulating supply of 276k USDC, which is already below the 40% threshold. However, the current changes take account of future circulating supply drops and helps to align risk accordingly.
xcUSDT: Similarly, for xcUSDT we recommend reducing the borrow cap from 800,000→400,000 with more borrow cap changes to follow. The borrow caps are inflated due to looping strategies with the true notional of borrows being close to ~330k USDT. We intend to reduce caps with a more step-wise approach in order to provide a more seamless transition. The current changes take account of future circulating supply drops and helps to align risk accordingly.
FRAX: The current circulating supply is 5.3M FRAX, we recommend reducing the caps from 5,250,000→2,000,000 to bring this to less than 40% of circulating supply.
xcDOT and WBTC.wh Utilization
WBTC.wh & xcDOT: The utilization for WBTC.wh and xcDOT 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 WBTC.wh from 5→2.5 and for xcDOT from 850,000→425,000 to effectively manage and limit risk exposure.
Collateral Factor for Wormhole Assets
USDC.wh
WETH.wh
WBTC.wh
With degrading liquidity on-chain as well as risks associated with bridged assets, Gauntlet recommends to continue reducing CFs by 1% for all wormhole assets to cap risk to the protocol. The reduction in CFs will not incur any liquidations.
Reserve Factors (RF)
WGLMR Top Suppliers
xcDOT Top Suppliers
WETH.wh Top Suppliers
WBTC.wh
A significant portion of the supply in assets like WGLMR, xcDOT, ETH.wh, and WBTC.wh has been driven by short-term incentive farming. In WGLMR, for example, four of the top ten suppliers solely supply , while another position employs recursive strategies. Similarly, in xcDOT, six out of the top ten suppliers are solely supplying, with the first and fifth largest suppliers borrowing recursively. This trend extends to assets like WETH.wh and WBTC.wh, where most positions are either only supplying or using looping strategies for incentive farming.
Increasing reserve factors for these assets presents an effective lever to counterbalance incentive-driven behaviors and increase reserves for the protocol. This adjustment not only encourages a closer alignment of utilization with the kink by indirectly capturing a portion of the supply APY but also significantly bolsters protocol reserves. The updated reserve factors will standardize non-stable assets at a 35% reserve factor while maintaining stablecoin reserve factors at 30%, with the exception of FRAX. We would like to flag that further increases in Reserve Factors are unlikely and that we will closely monitor the market to assess the impact of the reserve factor adjustments on current user positions.
IR Parameters
Utilization for stablecoin assets have remained under control since the previous recommendation with suggestions to reduce kink. To continue fine-tuning stablecoin utilization keeping circulating supply and liquidity in mind, Gauntlet recommends to further lower the kink while increasing Multiplier for xcUSDT and xcUSDC. The Mulitplier will move borrow APR at kink by a further ~85bps. Post the success 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 the borrow APR at kink to 6% to incentivize some of the recursive borrowing on xcUSDT and xcUSDC to happen via FRAX due to lower borrow rates. 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.
xcUSDC
IR Curve for xcUSDC
Recommended Borrow and Supply APR for xcUSDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 9.1 | 4.14 |
| 100 | 268.1 | 187.6 |
Current Borrow & Supply APR for xcUSDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 8.25 | 4.33 |
| 100 | 193.25 | 135.27 |
xcUSDT
IR Curve for xcUSDT
Recommended Borrow and Supply APR for xcUSDT
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 9.1 | 4.14 |
| 100 | 268.1 | 187.6 |
Current Borrow & Supply APR for xcUSDT
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 8.25 | 4.33 |
| 100 | 193.25 | 135.27 |
FRAX
IR Curve for FRAX
Recommended Borrow and Supply APR for FRAX
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 75 | 6 | 3.825 |
| 100 | 191 | 162.35 |
Current Borrow & Supply APR for FRAX
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 75 | 8.25 | 5.25 |
| 100 | 193.25 | 164.26 |
Supporting Data
Moonbeam 2% Market Depth for non-Stables
Moonriver Recommendations
Simple Summary
Gauntlet recommends a proposal to make an IR curve adjustments for xcKSM:
| xcKSM IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0.02 | 0.02 |
| Kink | 0.45 | 0.45 |
| Multiplier | 0.2 | 0.1 |
| Jump Multiplier | 3.5 | 3.5 |
Rationale:
Gauntlet would like to flag that on-chain liquidity for WMOVR, and xcKSM has been trending up, while FRAX liquidity has regained levels seen a month ago. However, we don’t suggest adjusting current risk parameters apart from the IR curve for xcKSM unless this trend is sustained. The current parameters for FRAX, KSM, and MOVR effectively balance risk and capital efficiency.
IR Curve
For the xcKSM market, there appears to be bad debt caused due to the Multichain hack where the user has supplied Multichain USDC to borrow xcKSM. In order to not accumulate more interest on bad debt, we recommend lowering the borrow APR in the short term until the bad debt is paid off.
We note that we will work with the community to have the bad debt paid across all assets on Moonriver and that there is sufficient reserves to cover the debt.
Recommended IR Curve for xcKSM
Projected APRs for xcKSM
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 2 | 0 |
| kink | 6.5 | 1.9 |
| 100 | 199 | 129 |
Current APRs for xcKSM
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 2 | 0 |
| kink | 11 | 3.21 |
| 100 | 203.5 | 132.27 |
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.