You may be aware that the Moonwell protocol has community “pause guardians” that can pause key functions in the protocol during emergencies to mitigate risk due to extreme events. While the Multichain bridge to Moonriver appears to be operating normally, there is some concern in the community about the future of the Multichain bridge, based on recent events and public communications from the Multichain team.
Moonwell Apollo’s user position data and Moonriver ecosystem activity do not signal any risk event that would require immediate guardian actions to prevent insolvency. Current positions on Apollo have been deleveraging risk by withdrawing/repaying Multichain positions. We wanted to poll the community to gauge the desire to take a more risk adverse or risk tolerant approach to the current situation, so that the community can signal their preferred risk management approach:
- Moonwell can initiate Pause Mint Guardian and Pause Borrow Guardian for Multichain assets on Apollo to freeze the USDC.multi, ETH.multi, and USDT.multi liquidity pools. These actions would help to prevent the following actions:
- Borrow Pause: will prevent new borrowing of Multichain assets, which could lead to low liquidity and potentially failed liquidations of Multichain assets if no liquidity is available
- Supply Pause: Will prevent depositing new Multichain assets, which can help the protocol avoid the creation of bad debt in a potential scenario where Multichain assets depeg from the underlying asset prices delivered by Chainlink price feeds
- If the community has no confidence in Multichain moving forward, we can start the deprecation of Multichain assets post-pausing market, similar to the way the BUSD.wh market was deprecated on Moonwell Artemis.
- Protects the protocol from any further increase of risk due to Multichain assets.
- Freezes and deprecates the 2 historically largest liquidity pools on MoonwellApollo (USDC.multi and ETH.multi).
- If Moonwell pauses Multichain assets, those actions could have unintended consequences for the Moonriver ecosystem. These actions could cause a market reaction and initiate the deterioration of Multichain assets on Moonriver.
The community would take no action now and instead continue monitoring the latest updates regarding Multichain, the Moonriver Ecosystem, and the Apollo protocol. If the following occurs, we would recommend Pause Borrow Guardian on all assets and Pause Supply Guardian on MultiChain Assets:
- Significant outflows of liquidity from Solarbeam
- Depegging of Multichain Asset Prices on Moonriver
- Growth of debt positions on Moonwell[image]
USDC/USDT deviation > 2% | | Outflow of liquidity from Solarbeam | 30% outflow on TVL from Solarbeam | | Debt Positions | 25% increase in Supply and Borrow |
Gauntlet Network would provide parameter recommendations to lower the borrow caps and collateral factors of Multichain assets during the regular 4 week cadence.
- Allows the Moonwell Apollo, Solarbeam, and Moonriver market dynamics to function normally until the market signals indicate the community should take the necessary actions.
- There would be no need to deprecate the two historically largest markets (USDC.multi and ETH.multi) unless market conditions require it.
- This could potentially leave the protocol vulnerable to new bad debt positions or full utilization risk if the pause guardians are not enacted quickly enough. There could also be new bad debt positions created that are unavoidable even if pause guardians are activated immediately upon depeg, as active loans currently exist in the markets.
We will proceed to put in a snapshot proposal to gauge the community’s sentiment on the above recommendations and make a decision on next steps.