Simple Summary
Risk Parameters
A proposal to adjust 2 risk parameters:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| USDC Collateral Factor | 80% | 82% |
| WETH Collateral Factor | 78% | 80% |
IR Parameters
A proposal to adjust IR parameters across 5 assets:
Gauntlet recommends reducing the Multiplier to 0.037 in order to lower the APY at the kink point to 3.96%. This adjustment is proposed to enhance the capital efficiency of the WETH liquidity pool.
| WETH IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0.01 | 0.01 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.04 | 0.037 |
| Jump Multiplier | 4.8 | 4.8 |
Per @Warden’s recommendation here, Gauntlet supports the Jump Multiplier increase to 8.6 for all stablecoins and cbETH IR parameter changes.
| DAI/USDC/USDbC IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.045 | 0.045 |
| Jump Multiplier | 2.5 | 8.6 |
| cbETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0.01 | 0 |
| Kink | 0.45 | 0.45 |
| Multiplier | 0.2 | 0.07 |
| Jump Multiplier | 3 | 3.15 |
Rationale:
Risk Parameters
Our recommendations have an estimated VaR at $0 and remains unchanged. LaR increased to $904k from $871k with our current recommendations. Based on simulation results, Gauntlet recommends increasing the collateral factors for WETH and USDC in order to improve capital efficiency with minimal impact to risk.
BASE Liquidity
| Assets | 10% Slippage | 10% Slippage ($) | 25% Slippage | 25% Slippage ($) | Circulating Supply |
|---|---|---|---|---|---|
| WETH | 1,500 | $2,467,755 | 3,600 | $5,922,612 | 42,089 |
| USDbC | 2,500,000 | $2,500,000 | 4,500,000 | $4,500,000 | 98,555,993 |
| DAI | 1,700,000 | $1,700,000 | 3,000,000 | $3,000,000 | 15,579,027 |
| cbETH | 400 | $690,292 | 1,200 | $2,070,876 | 22,486 |
| USDC | 2,200,000 | $2,200,000 | 2,600,000 | $2,600,000 | 158,044,892 |
BASE Circulating Tokens and Supply Cap
| Assets | Circulating Supply | Supply Cap | Supply Cap ($) | Supply Cap / Circulating Supply |
|---|---|---|---|---|
| WETH | 42,089 | 10,500 | $17,274,285 | 24.95% |
| USDbC | 98,555,993 | 10,000,000 | $10,000,000 | 10.15% |
| DAI | 15,579,027 | 10,000,000 | $10,000,000 | 64.19% |
| cbETH | 22,486 | 4,000 | $6,902,920 | 17.79% |
| USDC | 158,044,892 | 10,000,000 | $10,000,000 | 6.33% |
IR Recommendations
Stablecoin
Stablecoin IR curves would reflect the below changes:
The proposed adjustment to the Jump Multiplier is expected to increase the APR rate from 54% to 175% when the utilization is at 100%. This change should have no impact to current stablecoin positions based on current utilization. Should the utilization exceed the kink (set at 80%), the increased Jump Multiplier aims to provide stronger incentives for both suppliers and borrowers to bring the utilization back to the kink.
cbETH
cbETH IR Curve would reflect the below changes:
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0.00% | 0.00% | 0.00% |
| 45.00% | 3.15% | 1.06% |
| 100.00% | 176.40% | 132.30% |
By setting the Borrow APR at 3.15% precisely at the kink point, we aim to incentivize and encourage greater utilization of cbETH borrowing. Presently, cbETH exhibits a 10% usage of its borrow cap and a 5% utilization rate, highlighting substantial room for increased borrowing activity.
Source: Defillama
WETH
WETH IR Curve would reflect the below changes:
| Utilization | Current Borrow APR | Recommended Borrow APR |
|---|---|---|
| 0% | 1 | 1 |
| 80% | 4.2 | 3.96 |
| 100% | 100 | 100 |
cbETH Yield APY has observed a recent decline in performance. To ensure that our APRs remain competitive in comparison to the cbETH APY, we propose reducing the Multiplier rate for WETH. This adjustment is anticipated to lower the Borrow APR by approximately 25 basis points, with the objective of encouraging users to persist in utilizing the recursive yield strategy.
cbETH Yield - Timeseries
| APY - 30D AVG | APY - 90D AVG | |
|---|---|---|
| cbETH | 3.32% | 3.46% |
WETH Utilization and Borrow Balance
In recent weeks, there has been a noticeable decline in WETH utilization, primarily driven by users closing their WETH debt positions. The decision to reduce the Multiplier is driven by the intent to address this trend and, ideally, incentivize users to engage in further borrowing of WETH.
WETH Borrow Positions by User Strategy
Recursive yield strategy represents 21.22% of WETH borrowers.
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.
Supporting Data
The below figures show trends on key market statistics regarding borrows and utilization that we will continue to monitor:
Top 10 Borrowers’ Aggregate Positions & Borrow Usages
The highest borrow usage position 8f208812 is a recursive position with USDC and DAI.
Top 10 Borrowers’ Entire Supply
Link to Chart
Top 10 Borrowers’ Entire Borrows
Link to Chart
Utilization Rate of Assets - Timeseries
Link to Chart.
Borrow Cap Utilization
Supply Cap Utilization
Balances by User Strategies
LST Yield Farming sits at 10.66% for all outstanding debt positions.
Circulating Token USDC vs USDbC Supply
Gauntlet continues to monitor liquidity and circulating supply for native USDC and USDbC. Last week, there was a large fluctation in circulating supply of native USDC on BASE chain, but it has returned to 160M+.
Collateral Usage and Collateralization Ratios
WETH and USDC have the highest collateral usage.
Top 10 entire account supply & borrow positions ordered by USDC supply
Top 4 suppliers of USDC are recursive positions.
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 Methodology
Gauntlet Model Methodology
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