Gauntlet's Initial Recommendations for Moonwell on Base


With BASE Mainnet announcing its opening to builders on July 13th in preparation for their mainnet general launch in early August, Gauntlet is excited to move forward with recommendations for Base protocol to help it get initiated. Asset recommendations will be based on risk analysis, taking into account both expected and actual figures. Gauntlet is providing these recommendations in preparation of the upcoming Base protocol deployment to the Base chain, which is scheduled to occur in the near future. To conduct a thorough risk analysis in these assets, Gauntlet requires visibility into the actual on-chain liquidity.

Gauntlet will propose four risk recommendations in this forum regarding the Base protocol under one snapshot vote in which we will have the following options:

  • Risk averse w/ Supply/Borrow Cap Guardian
  • Risk averse w/o Supply/Borrow Cap Guardian
  • Risk tolerant w/ Supply/Borrow Cap Guardian
  • Risk tolerant w/o Supply/Borrow Cap Guardian

We coalesce our Asset Risk tolerance and Gauntlet’s Guardian proposal under one snapshot to simplify the voting process and provide clear next steps. Gauntlet’s preferred option would include us as Supply/Borrow Cap Guardian.

Asset Recommendations

Regarding the initial listing of assets on the Base Protocol, Gauntlet presents two options for Collateral Factors to the community. Option 1 is a highly conservative approach aimed at testing the new Base mechanics. The conservatism stems not only from market risk, which is Gauntlet’s primary focus, but also from smart contract and other technical risks. Initially, the collateral factor will be set to 0 for these liquidity pools, with further recommendations to follow once user positions flow into the pools. On the other hand, Option 2 is less conservative and assumes that the community is more risk tolerant, and does not require extensive testing of BASE mechanics on a new chain.

Collateral Factor Options

Option 1 (Risk Averse)

Collateral Factor 0% 0% 0% 0% 0%

Option 2 (Risk Tolerant)

Collateral Factor 80% 75% 70% 73% 73%

Gauntlet plans to empower the community to choose between the 2 options by submitting a snapshot for community members to decide what collateral factors to list with these liquidity pools during the initialization of the Base protocol.

General Recommendations

Regardless of the options chosen by the community, these parameter recommendations will remain applicable for all options.

Risk Parameters

Liquidation Incentive 1.1 1.1 1.1 1.1 1.1
Supply Cap 40,000,000 ($40M) 10,500 ($20M) 330 ($10M) 5,000 ($10M) 3,700 ($8M)
Borrow Cap 32,000,000 ($32M) 6300 ($12M) 132 ($4M) 1500 ($3M) 1110 ($2.3M)

IR Recommendations

Base 0 0.02 0.02 0.01 0.01
Kink 0.8 .6 .6 .45 .45
Multiplier 0.05 0.15 0.15 0.2 0.2
Jump Multiplier 2.5 3 3 3 3
Reserve Factor 0.15 0.25 0.25 0.25 0.25

Supply & Borrow Cap Guardians Recommendation

Enable Gauntlet as Supply & Borrow Cap Guardian

To enhance risk management and promote efficient growth within the BASE protocol, Gauntlet proposes to serve as Supply and Borrow Cap Guardians, enabling the moonwell community to delegate the authority to adjust caps to our Gauntlet. Within the Moonwell technical docs, it is stated that this Cap Guardian function “is useful if you wanted to delegate the adjustment of the borrow caps across markets to someone who specializes in these sorts of adjustments without giving them administrative access across the rest of the protocol.” As a community participant specializing in these adjustments, Gauntlet recommends being added as Guardian. We seek this guardianship for the following reasons:

  • Proactive Cap Adjustments: With this responsibility, we can promptly modify caps in response to market risk events, on-chain DEX liquidity fluctuations, and changes in liquidity pool usage.
  • Streamlined Process: Will simplify voting overhead and operations.
  • Expedited Recommendations: Gauntlet can recommend borrow and supply cap adjustments without being subject to the standard 3-day voting period and timelock, thereby increasing the speed of implementing cap changes.

If entrusted with Guardian, Gauntlet commits to adhere to the following limitations when making supply and borrow cap adjustments:

  • For each asset, only 1 increase is allowed every 5 days.
  • The supply cap can never be increased above 100% of the current one.
  • The borrow cap can never be increased above 100% of the current one.

Furthermore, Gauntlet will ensure transparency and community engagement by notifying the community of cap changes and providing reasoning through forums.


BASE Chain

BASE is a Layer 2 EVM blockchain developed in collaboration with Optimism, utilizing the MIT-licensed OP Stack. The decentralized ecosystem of Base aims to leverage Coinbase’s products and distribution, offering seamless integration with Coinbase, easy fiat on ramps, and access to over 110 million users and more than $80 billion in assets within the Coinbase ecosystem. The potential size of the BASE chain impacts our assumed figures within this recommendation.

BASE has been launched with multiple launch partners which strengthens the perception of future growth of the chain:

Assets’ Market Analysis

Token Liquidity and Market Stats

Market Cap $27,025,323,945 $227,014,563,721 $580,763,918,405 $2,271,743,376 $4,546,480,365
Circulating Supply 27,015,257,564 120,201,013 19,431,943 1,154,928 2,129,499
2% Depth (DEX/CEX) $118,338,331 $31,590,226 $13,101,035 $428,993 $4,438,157

Utilize native asset Market Caps and Circulating Supply for WETH and WBTC. Market Cap and Circulating Supply for staked assets cbETH and wstETH are derived from ETH mainnet data. All recommended assets have large market caps and strong tokenomics across global chains.

When comparing cbETH and wstETH, we observe that cbETH has a relatively lower 2% Depth across multiple centralized and decentralized exchanges. However, we anticipate that cbETH will exhibit greater liquidity and circulating supply on BASE due to its association with Coinbase.

Collateral Factor

To ensure a secure launch and accommodate potential protocol and user position changes, Gauntlet advises adopting either of our conservative collateral factor recommendations. Based on the assets’ Volatility, Max Drawdown, and other lending platforms’ parameters, we recommend these conservative CFs for the non risk tolerant option:

Collateral Factor 80% 75% 70% 73% 73%

Base is set to become the first protocol under Moonwell to list staked assets within its liquidity pools. When making asset recommendations for these pools, it is crucial to consider the utilization of recursive staked yield strategies employed by users to optimize their earnings. As such, Gauntlet recommends a conservative 73% CF for the staked assets until we can get more user positions and data within our simulation.

YTD Daily Max Drawdown

30D Volatility

Liquidation Incentive

The Liquidation Incentive is the discount on collateral that a liquidator receives for liquidating a position. This additional collateral given to liquidators is an incentive to perform liquidations and keep the protocol solvent. We recommend a 10% liquidation incentive for Base assets on the protocol. This recommendation is aligned with our model recommended values for Apollo and Artemis and best balances protocol safety and reducing penalizing users in the event of a liquidation.

Supply and Borrow Caps

Borrow and supply caps are the primary parameter recommendations we can make to mitigate protocol risk when listing new assets. Gauntlet recommends setting the borrow and supply caps strategically to allow for market growth while minimizing risk to the protocol. We give supply & borrow cap recommendations based on assumed BASE TVL. It’s hard to predict the proportion of asset market cap proportions to total BASE TVL, so the numbers below are just an approximation. That being said, unlike mainnet Ethereum, we imagine cbETH to have a higher circulating supply than wstETH on BASE, due to the Coinbase relationship. Again, these numbers are dependent on BASE TVL upon launch and may change.


Supply Cap 40,000,000 ($40M) 10,500 ($20M) 330 ($10M) 5,000 ($10M) 3,700 ($8M)
Borrow Cap 32,000,000 ($32M) 6300 ($12M) 132 ($4M) 1500 ($3M) 1110 ($2.3M)

Relative L2 Chain TVLs

Chain TVL
Optimism $2.4B
Arbitrum $5.9B
zkSync Era $572M

IR Curves

For the IR recommendations, we have classified our curve suggestions into three distinct categories: stable assets, non-stable assets, and staked assets. For stable and non-stable assets, our recommendation aligns with the IR parameters derived from our modeled IR curves on Artemis. This approach ensures consistency and harmonizes the listing of assets with similar characteristics within Moonwell’s ecosystem

As mentioned earlier, Base is set to become the first protocol to list staked assets and our recommendations need to consider the utilization of recursive staked yield strategies employed by users to optimize their earnings. In light of this, Gauntlet advises adopting a more conservative approach with IR parameters for staked assets, featuring a lower kink and higher multiplier.

Base 0 0.02 0.02 0.01 0.01
Kink 0.8 .6 .6 .45 .45
Multiplier 0.05 0.15 0.15 0.2 0.2
Jump Multiplier 2.5 3 3 3 3
Reserve Factor 0.15 0.25 0.25 0.25 0.25

Non-Stable IR Curves (WETH & WBTC)

Stable IR Curves (USDC)

Staked IR Curves (cbETH & wsETH)

Once Base protocol gets more user positions and data, Gauntlet can utilize our internal model to make data-informed decisions around setting borrower and supplier interest rates to reduce risk or increase protocol revenue without materially impacting risk.


  • As the protocol and liquidity evolves and more data becomes available, these parameters may be adjusted accordingly. By incorporating protocol data, user positions and liquidity data in our simulations, we can provide comprehensive risk parameter recommendations.
  • If the community opts to initiate a lending pool with collateral factors greater than 0, Gauntlet strongly advises the protocol to establish reserves within the pools as a precautionary measure against a Hundred Finance attack.

Next Steps

  • Gauntlet will follow-up with a snapshot on the risk tolerance and Guardianship options on Monday.
  • Gauntlet will put up a governance proposal following the snapshots, if necessary.
  • Gauntlet will provide on-going recs bi-weekly once BASE is deployed.

Hi Community,
We have posted the proposal to a snapshot vote.

1 Like

Warden Recommendations for Moonwell on Base

Introduction of Moonwell Protocol v2

Moonwell on Base will be the first deployment of Moonwell Protocol v2, which introduces the following new features:

  • Supply caps - Risk parameter which aims to limit protocol long exposure to certain assets and mitigate price manipulation attacks.
  • Chainlink composite oracle - Capability to aggregate multiple oracle price feeds together
  • Multi-token emissions - Ability to distribute rewards using multiple tokens for an individual market.
  • Cross-chain governance - Allows governance of Moonwell deployment on Base to be controlled by Moonwell governance on Moonbeam.

From a market risk management perspective, Moonwell Protocol v2 follows the same core principles as v1. Our risk management framework stays essentially the same for this deployment, except for the new possibilities introduced by supply caps. We will update our methodology docs to include this addition.

Supply / Borrow Cap Guardian

We are in favor of introducing supply & borrow cap guardians, as this will enable tighter management of caps relative to demand for borrowing and lending, and potentially allow the protocol to grow more quickly, especially during the critical time period shortly after launching the protocol.

Oracle Price Feeds

Deployment of proposed markets is conditional to availability of appropriate oracle price feeds for underlying assets. That said, oracle price feeds will most likely be available at the soonest for the proposed set of assets given their current traction.

Moreover, the introduction of composite oracles may open the door for better performing price feed options to choose from. We’ll be able to evaluate further possibilities once substantial historical data on Base chain is available. This optimization can be done at a later moment if necessary.

Supply / Borrow Caps Recommendations

We recommend using more conservative supply and borrow caps initially, and increase them rapidly as liquidity and demand changes on Base. The objective of this recommendation is to:

  • Further mitigate the risks associated with low DEX liquidity during the time period shortly after launch
  • Ensure caps are in line with demand for lending and borrowing.

Gauntlet Recommendations (assuming $200M chain TVL)

Supply Cap 40,000,000
($40M / 20% TVL)
($20M / 10% TVL)
($10M / 5% TVL)
($10M / 5% TVL)
($8M / 4% TVL )
Borrow Cap 32,000,000
($32M / 16% TVL )
($12M / 6% TVL)
($4M / 2% TVL)
($3M / 1.5% TVL)
($2.3M / 1.2% TVL)

Warden Recommendations (assuming $200M chain TVL)

Supply Cap 10,000,000
($10M / 5% TVL)
($10M / 5% TVL)
($5M / 2.5% TVL)
($5M / 2.5% TVL)
($5M / 2.5% TVL)
Borrow Cap 5,000,000
($5M / 2.5% TVL)
($4M / 2% TVL)
($1.3M / 0.7% TVL)
($1.3M / 0.7% TVL)
($1.3M / 0.7% TVL)

Collateral Factors Recommendations

By our analysis, the collateral factors suggested in option 2 (risk tolerant) offer sufficient buffer to bootstrap the protocol with minimal risk following the protocol’s deployment.

We also strongly recommend collateral factors to be set at 0 during deployment to mitigate the risk of someone exploiting a known Compound v2 issue (see Hundred Finance exploit and Moonwell known issues).

For reference, steps for safe deployment as proposed by Hexagate are the following:

  • Initialize markets using 0 as collateral factor (no borrowing possible).
  • Burn a small amount of collateral token supply for each market.
  • Set collateral factors for each market as specified

Liquidation Parameters Recommendations

Given the large buffer provided by suggested collateral factors vs max historical drawdowns, we suggest starting with the same liquidation incentive, close factor and protocol seize share settings than currently set on Apollo and Artemis.

Liquidation Incentive 10% 10% 10% 10% 10%
Close Factor 50% 50% 50% 50% 50%
Protocol Seize Share 30% 30% 30% 30% 30%

Note that liquidation incentive and close factor settings are set globally for all markets, whereas protocol seize share can be tuned on a per-market basis if necessary.

Interest Rate Models Recommendations

We are in favor of implementing the suggested interest rate curves for the initial deployment. As a reference, the suggested rate curves are more conservative than comparable markets on AAVE across all chains.

Assuming user behavior is going to be similar for Moonwell on Base than for other protocols, the suggested parameters should help mitigate liquidity risk for lenders while we collect enough information to further optimize the models.

1 Like

Hey Community,
The snapshot has closed with Risk tolerant w/ Supply/Borrow Cap Guardian garnering the most votes.

1 Like

Hi Community,

With the full opening of BASE by August 9th, we would like to give an update on the BASE chain and provide further additions to our risk recommendation proposal.

Summary on Current State of BASE Chain

BASE remains exclusive to developers at present, but we’ve witnessed a significant influx of Total Value Locked (TVL) to the chain. As of now, there has been $91M TVL bridged to BASE. The deployment of BASE represents a unique situation with unique challenges in projecting liquidity metrics. These TVL inflows are strong signals for a robust ecosystem, including BASE bridge and liquidity sources like Sushiswap and Balancer being deployed. Gauntlet recommends to maintain supply and borrow caps to manage risk and ensure capital efficiency.

Additional Recommendations:

Protocol Risk Parameter Value
Close Factor 50%

The Close Factor is the percentage of a specific borrower’s position that can be liquidated in one transaction. Gauntlet recommends maintaining the Close Factor the same as other networks.

Risk Parameter USDC WETH WBTC cbETH wsETH
Seize Share 3% 3% 3% 3% 3%

A portion of the liquidation incentive is given to the collateral mToken reserves as determined by the protocol seize share.

Changes to current proposal

  • WBTC and wstETH will not be ready for Moonwell BASE debut, so they will not be included in the initial MIP but will be added to the protocol at a later date.
  • Moonwell is listing the bridged asset USD Base Coin (USDbC) for USDC.
1 Like