# Moonwell Base - Onboard DAI as collateral **URL:** \ **Category:** Moonwell Improvement Proposal\ **Tags:** base\ **Created:** [August 16, 2023, 1:27pm UTC](https://forum.moonwell.fi/t/moonwell-base-onboard-dai-as-collateral/570 "2023-08-16T13:27:27Z")\ **Posts on this page:** 4\ **Page:** 1
**Author:** ![WardenFinance](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/wardenfinance/32/427_2.png) [@WardenFinance](https://forum.moonwell.fi/u/WardenFinance)\ **Post date:** [August 16, 2023, 1:27pm UTC](https://forum.moonwell.fi/t/moonwell-base-onboard-dai-as-collateral/570/1 "2023-08-16T13:27:27Z")
# Moonwell Base - Onboard DAI as collateral ## Summary We propose onboarding DAI as a collateral asset on Moonwell’s Base deployment. Due to the market demand and rapid increase in DAI liquidity on Base we think it appropriate to list the asset as collateral. Additionally, we propose updating USDbC’s interest rate curve to keep it in line with DAI. ## Recommendations We propose launching DAI as collateral with the following parameters: | Asset | CF | Supply cap | Borrow cap | IRM | Oracle | Protocol seize share | | --- | --- | --- | --- | --- | --- | --- | | [DAI](https://basescan.org/token/0x50c5725949a6f0c72e6c4a641f24049a917db0cb) | 0.8 | 5M | 4M | Stable (updated) | [Chainlink DAI / USD](https://basescan.org/address/0x591e79239a7d679378eC8c847e5038150364C78F) | 30% | We propose to set DAI’s interest rate curve parameters and update USDbC’s interest rate curve parameters as follow: | Stable IRM Parameter | Value (current) | Value (proposed) | | --- | --- | --- | | Base rate | 0 | 0 | | Multiplier | 0.05 | 0.05 | | Kink | 0.8 | 0.8 | | Jump multiplier | 2.5 | 4.775 | | Reserve factor | 0.15 | 0.15 | The proposed stablecoin interest rate curve increases the maximum interest rate in cases of high utilization to mitigate liquidity concerns. ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/0983e54bf44e571909a8180628ce05c706453ebb.png) | Utilization | Borrow rate (current) | Borrow rate (proposed) | | --- | --- | --- | | Base utilization (0%) | 0% | 0% | | Kink utilization (80%) | 4% | 4% | | Max utilization (100%) | 56% | 100% | ## Analysis KPIs for Dai on Base, with USDbC as comparison (as of August 15 2023) | Asset | Circulating supply (Base) | Circulating supply (all chains) | Bridge | -5% liquidity depth (to ETH) | | --- | --- | --- | --- | --- | | DAI | 15M | 4B | Base (Native) | $384k | | USDbC | 52M | 26B | Base (Native) | $1.33M | Given the significant difference in on-chain liquidity of DAI vs USDbC, we recommend scaling the supply and borrow caps for DAI to ⅛ of those of USDbC. | Market | Supply cap | Borrow cap | | --- | --- | --- | | DAI | 5M | 4M | | USDbC | 40M | 32M | ## Deployment We 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](https://www.comp.xyz/t/hundred-finance-exploit-and-compound-v2/4266)). 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 ## References #### DAI → USDbC Liquidity profile ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/06281842911cae7b0350b6d880b19c679cff7b10.png) ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/2245764952415c2f885a863bc0ba21144a0bf98d.png) #### USDbC → DAI Liquidity profile ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/871f8078d12f7554733b3038f35fe44aa5294b1e.png) ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/e8013d8b0f3ff62907fb5028029a980d266288aa.png) #### DAI → WETH Liquidity profile ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/dfd62b636d78a70a83e0cacc85e5adf7ebcb4b78.png) ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/e6904cb6197cb08e2f2d7f7dec749771a4a192b9.png) #### WETH → DAI Liquidity profile ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/e77b5e08ed7de214358928afbb53182254c6ddfd.png) ![image](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/e28c8fa0f77fca86df982d19a7bfec4907667f3e.png) ---
**Author:** ![delz](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/delz/32/453_2.png) [@delz](https://forum.moonwell.fi/u/delz)\ **Post date:** [August 17, 2023, 11:54pm UTC](https://forum.moonwell.fi/t/moonwell-base-onboard-dai-as-collateral/570/2 "2023-08-17T23:54:56Z")
After seeing community member Warden propose to list DAI as an asset, Gauntlet has conducted a market risk analysis for this initial asset listing ## Risk Parameter Recommendations | Parameters | Gauntlet Rec | Warden Rec | | --- | --- | --- | | CF | 0.8 | 0.8 | | Supply Cap | 6,000,000 | 5,000,000 | | Borrow Cap | 5,000,000 | 4,000,000 | | Protocol Seize Share | 0.3 | 0.3 | ## DAI (Stablecoin) IR Recommendations | Stable IR Parameters | Gauntlet Rec | Warden Rec | | --- | --- | --- | | Base rate | 0 | 0 | | Multiplier | 0.05 | 0.05 | | Kink | 0.8 | 0.8 | | Jump Multiplier | 2.5 | 4.775 | | Reserve factor | 0.15 | 0.15 | Increasing the Jump Multiplier will minimize high risk utilization to the liquidity pool which can hinder liquidations and create a poor UX for suppliers, as it can restrict their ability to withdraw an asset from the pool. However, such an increase might adversely impact stablecoin borrowers, as stablecoin liquidity pools often borrow close to the kink. A steeper gradient would thus intensify the interest paid by borrowers should utilization surpass the kink. For instance, with 82% utilization, the proposed curve would generate a Borrower APR of 14.55%, in contrast to the 10% in the existing curve. Since USDbC has not experienced any significant utilization above the 80% kink, we do not recommend increasing the max interest rate for utilization post kink. ### USDbC and DAI IR Curves ![](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/26dbb938a3977d864b5ddbce79f7abf47bed28c5.png) ## Specifications **Token Liquidity and Market Stats** | | DAI | | --- | --- | | Market Cap | $3,898,885,022 | | Circulating Supply | 3,902,769,405 | | 2% Depth (DEX/CEX) | $111,641,646 | DAI has large market caps and strong tokenomics across global chains. ### 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. | Asset | Cap Recommendation | | --- | --- | | Supply Cap | 6,000,000 ($6M) | | Borrow Cap | 5,000,000 ($5M) | ## IR Curves **Stable IR Curves (DAI)** ![](https://europe1.discourse-cdn.com/flex017/uploads/moonwell/original/1X/1689436f6ae5e1f740610fb687ceee8a3ed5af3f.png) ## Notes - 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. ---
**Author:** ![smarty](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/smarty/32/1116_2.png) [@smarty](https://forum.moonwell.fi/u/smarty)\ **Post date:** [August 18, 2023, 7:44pm UTC](https://forum.moonwell.fi/t/moonwell-base-onboard-dai-as-collateral/570/3 "2023-08-18T19:44:31Z")
Excellent, timely proposal for the development of Moonwell. ---
**Author:** ![WardenFinance](https://dub1.discourse-cdn.com/flex017/user_avatar/forum.moonwell.fi/wardenfinance/32/427_2.png) [@WardenFinance](https://forum.moonwell.fi/u/WardenFinance)\ **Post date:** [August 21, 2023, 6:44pm UTC](https://forum.moonwell.fi/t/moonwell-base-onboard-dai-as-collateral/570/4 "2023-08-21T18:44:34Z")
After discussing offline with @delz and @jakeaujus from Gauntlet, here are the final recommendations: | Asset | CF | Supply cap | Borrow cap | IRM | Oracle | Protocol seize share | | --- | --- | --- | --- | --- | --- | --- | | [DAI](https://basescan.org/token/0x50c5725949a6f0c72e6c4a641f24049a917db0cb) | 0.8 | 6M | 5M | Stable | [Chainlink DAI / USD](https://basescan.org/address/0x591e79239a7d679378eC8c847e5038150364C78F) | 30% | We will launch the market with Stable IRM, as it is configured at the moment for USDbC. The IRM can be further optimized later. | IRM Parameter | Value | | --- | --- | | Base rate | 0 | | Multiplier | 0.05 | | Kink | 0.8 | | Jump multiplier | 2.5 | | Reserve factor | 0.15 | The proposal to initialize DAI market will be sent to on-chain vote this week.