Base Recommendations
Simple Summary
Risk Parameters
A proposal to adjust 6 risk parameters:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| USDC Supply Cap | 92,000,000 | 100,000,000 |
| USDC Borrow Cap | 84,000,000 | 92,000,000 |
| cbETH Supply Cap | 7,200 | 8,000 |
| cbETH Borrow Cap | 2,520 | 3,200 |
| AERO Supply Cap | 16,000,000 | No Change |
| AERO Borrow Cap | 10,000,000 | No Change |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust WETH, wstETH, cbETH, rETH and AERO’s IR curve:
| WETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.02 | 0.01 |
| Jump Multiplier | 4.2 | 4.2 |
| wstETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.35 | 0.35 |
| Multiplier | 0.075 | 0.061 |
| Jump Multiplier | 3.5 | 3.5 |
| cbETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.35 | 0.35 |
| Multiplier | 0.075 | 0.061 |
| Jump Multiplier | 3.5 | 3.5 |
| rETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.35 | 0.35 |
| Multiplier | 0.075 | 0.061 |
| Jump Multiplier | 3.5 | 3.5 |
| AERO IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.45 | 0.45 |
| Multiplier | 0.145 | 0.18 |
| Jump Multiplier | 3.15 | 3.96 |
Rationale:
Risk Parameters
Gauntlet recommends increasing supply and borrow caps for USDC and cbETH, while recommend no change in caps for AERO. Gauntlet also recommends making changes to borrow rates of WETH, LSTs (wstETH, cbETH, rETH) and AERO to reflect market rates.
Cap Recommendations
Gauntlet suggests implementing adjustments to supply and borrow caps across USDC, cbETH and DAI to optimize protocol performance and mitigate risks. This includes:
- USDC - In accordance with Gauntlet’s methodology for managing parameters, we propose scaling up the supply caps (92M → 100M) and borrow caps(84M → 92M) for USDC. Of the top 10, four positions are borrowing non-recursively, with two positions borrowing AERO. The rest of the positions are borrowing recursively.
USDC
- cbETH - We propose scaling up both supply caps (7,200 → 8,000) and borrow caps for cbETH (2,520 → 3,200). Of the top 10 positions, most users are borrowing recursively or correlated assets, with two postions only supplying collateral. The rest of the positions are supplying a blended collateral of either USDC or WETH against WETH or USDC borrows. 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.
cbETH
The above adjustment also takes into account the increasing on-chain liquidity for cbETH as show by the 25% DEX Slippage below.
- AERO - Based on the analysis done in the previous Cap updates, Gauntlet recommends making no changes to the AERO caps despite supply and borrow caps crossing the 90% threshold. We alternatively recommend increasing borrow APRs at kink to bring utilization closer to kink. This is due to the increasing AERO emissions and it’s effect on on-chain liquidity, with hightened volatility at the backdrop.
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 |
|---|---|---|---|---|---|---|
| AERO | 10,000,000 | 16,000,000 | 92.31% | 89.59% | 4,814,363 | $3,588,172.52 |
| rETH | 350 | 1,000 | 50.31% | 97.40% | 841 | $3,191,765.81 |
| wstETH | 2,400 | 6,300 | 20.85% | 60.49% | 856 | $3,423,863.85 |
| cbETH | 2,520 | 7,200 | 38.03% | 74.22% | 945 | $3,465,701.75 |
| USDbC | 200,000 | 250,000 | 66.19% | 74.86% | 5,771,097 | $5,770,898.03 |
| WETH | 40,000 | 60,000 | 52.41% | 57.29% | 1,021 | $3,487,985.67 |
| DAI | 1,500,000 | 2,000,000 | 56.19% | 60.63% | 292,877 | $292,815.18 |
| USDC | 84,000,000 | 92,000,000 | 71.97% | 72.90% | 3,585,887 | $3,585,763.25 |
IR Parameters
Based on our ongoing monitoring of asset utilization and market dynamics, we propose revising the borrow rates at kink thresholds for WETH, LSTs, and AERO to better reflect current market conditions and borrower demand.
WETH IR Parameters
Despite previous reductions in borrow APRs, utilization for WETH has consistently remained below the current kink threshold of 80%. To better reflect prevailing market conditions, we advocate for a further decrease in Borrow APRs. Specifically, we propose reducing slope1, which will lower APRs from 1.6% to 0.8%, representing an 80 basis point reduction. This adjustment aims to enhance capital efficiency and encourage greater borrowing activity.
Gauntlet continues to monitor market borrow rates and utilization on Moonwell closely, allowing for ongoing adjustments to IR parameters as necessary.
Recommended WETH IR Curve
Projected APRs for WETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 0.8 | 0.48 |
| 100 | 84.8 | 63.6 |
Current APRs for WETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 1.6 | 0.96 |
| 100 | 85.6 | 64.2 |
LST IR Parameters
LST utilization has persistently declined, dropping below the kink threshold. To accurately gauge market dynamics, we propose a reduction in borrow APRs to ascertain true market rates. While previous kink reductions have supported interest rates amid low utilization, further reducing borrow rates is deemed beneficial for strengthening LST markets. Gauntlet suggests lowering borrow rates to 2.13% from the current 2.62% to achieve this.
Recommended LST IR Curve
Projected APRs for LSTs (wstETH, cbETH, rETH)
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 2.135 | 0.56 |
| 100 | 229.6 | 172.22 |
Current APRs for LSTs (wstETH, cbETH, rETH)
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 2.625 | 0.64 |
| 100 | 230.12 | 161 |
AERO IR Parameters
Despite previous increases in borrow rates, AERO utilization continues to exceed the kink threshold, indicating significant demand for borrowing AERO. To rebalance this market and align utilization with healthier levels, Gauntlet recommends raising the borrow APR to 8.1%.
Recommended AERO IR Curve
Projected APRs for AERO
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 8.1 | 2.73 |
| 100 | 225.9 | 169.42 |
Current APRs for AERO
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 6.5 | 2.2 |
| 100 | 176.4 | 132.3 |
Gauntlet will monitor the utilization of WETH, LSTs and AERO and consider additional actions if necessary.
Moonbeam Recommendations
Simple Summary
A proposal to adjust 2 total risk parameters:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| xcDOT Borrow Cap | 425,000 | 150,000 |
| FRAX Borrow Cap | 2,000,000 | 500,000 |
A proposal to make an IR curve adjustments for WBTC.wh:
| WBTC.wh IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0.02 | 0.02 |
| Kink | 0.6 | 0.45 |
| Multiplier | 0.15 | 0.187 |
| Jump Multiplier | 3 | 3 |
Rationale
Risk Parameters
The Liquidity on Stellaswap, Moonbeam’s leading DEX is down 25% compared to start of the month. Gauntlet recommends reducing borrow caps for xcDOT based on prevailing liquidity conditions and reducing FRAX borrow caps due to underutilization. We also recommend reducing kink for WBTC.wh considering 99% borrow cap utilization.
Borrow Caps
xcDOT: The current borrowed amounts for xcDOT are less than 20% of the borrow caps. Gauntlet recommends reducing caps (425,000 → 150,000) to tackle under-utilization. Five out of the top 10 are only supplying collateral, the rest are borrowing blended correlated assets or stablecoins.
FRAX: Similarly, the borrows for FRAX make up to only 3% of the total borrow caps. The current on-chain liquidity for FRAX is around the $72k range which is 83% of the borrowed amounts. Although there are more avenues to move FRAX such as the FRAX ferry/FRAX swap, we recommend reducing the borrow cap (2.5M → 500K) to gradually align the risk with respect to on-chain liquidity.
IR Parameters
The utilization of the Borrow Cap for WBTC.wh is currently at 99%, suggesting that borrowed amounts are almost fully utilized despite existing liquidity conditions, potentially influenced by looping strategies. To mitigate risks, we recommend reducing the kink from 60% to 45%. Additionally, we propose increasing slope1 to change borrow APRs from 11% to 10.4%. This adjustment aims to manage the high utilization effectively. Any utilization beyond the kink level should trigger higher borrow APRs, encouraging users to return to the kink.
WBTC.wh DEX Liquidity
IR Curve for WBTC.wh
Recommended Borrow and Supply APR for WBTC.wh
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 2 | 2 |
| kink | 10.41 | 3.04 |
| 100 | 175.45 | 114 |
Current Borrow & Supply APR for WBTC.wh
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 2 | 2 |
| kink | 11 | 4.28 |
| 100 | 131 | 85.14 |
Moonriver Recommendations
Simple Summary
Gauntlet suggests reducing borrow caps across all assets:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| MOVR Borrow Cap | 20,000 | 17,000 |
| FRAX Borrow Cap | 270,000 | 200,000 |
| xcKSM Borrow Cap | 14,000 | 10,000 |
Rationale:
Gauntlet suggests modifying Borrow caps across all Moonriver assets to align with prevailing liquidity conditions:
MOVR: Gauntlet advises reducing Borrow caps from 20,000 to 17,000. Currently, $156k is borrowed against a total liquidity of $515k. The liquidity trend has been declining year-to-date.
FRAX: Similarly, for FRAX, Gauntlet recommends lowering borrow caps from 280,000 to 200,000. Presently, $114k is borrowed with total liquidity amounting to $112k. Liquidity in the FRAX pool has been persistently decreasing as well.
xcKSM: Gauntlet also suggests reducing xcKSM’s borrow cap from 14,000 to 12,000. Borrowed amounts total $177k against Solarbeam’s backdrop of declining liquidity ($127k).
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.