[Gauntlet] Mainnet v3 USDS Comet Asset Listing
Simple Summary
In line with the recommendations for DAI Comet, Gauntlet would like to update the analysis for this comet to consider USDS, Sky’s new stablecoin. We propose the following initial parameter recommendations for the Mainnet v3 USDS Comet:
Risk Parameters
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| cbBTC | 80% | 85% | 5% | 150 cbBTC |
| tBTC | 76% | 81% | 10% | 285 tBTC |
| WETH | 83% | 90% | 5% | 50,000 WETH |
| USDe | 70% | 75% | 15% | 50,000,000 USDe |
| sUSDe | 70% | 75% | 15% | 38,000,000 sUSDe |
| sUSDS | 88% | 92% | 4% | 50,000,000 sUSDS |
| wstETH | 82% | 87% | 8% | 10,000 wstETH |
Rationale
USDS utility
USDS can be swapped 1:1 for DAI through atomic swaps on Sky’s platform. Additionally, USDS can be minted against USDC, with USDS holders earning rewards in SKY tokens, which we believe will encourage faster migration from DAI to USDS. Beyond SKY token rewards, sUSDS (formerly sDAI) is also eligible for the DSR rate of 6% when staked.
Collateral Assets
Gauntlet suggests a few modifications to the initially proposed collateral assets. We do not recommend listing WBTC at this time due to ongoing concerns around its custodial processes, unless the community strongly prefers otherwise. Instead, we recommend listing tBTC and cbBTC as alternatives. Additionally, we propose listing wstETH and sUSDS, as these assets could facilitate levered yield strategies.
Supply Caps and Liquidation Penalty
Given USDS and DAI can be swapped atomically, USDS benefits from DAI’s deep liquidity. However, currently, there are no USDS-collateralAsset pools on DEXs which may add additional steps to liquidate collateral. Keeping this in mind, Gauntlet recommends setting caps which would incur slippage equal to the liquidation penalty against DAI pairs. We recommend setting caps for Ethena stablecoins to levels mentioned in the previous post.
cbBTC/DAI Slippage on 10/14/24
wstETH/DAI Slippage on 10/14/24
WETH/DAI Slippage on 10/14/24
Collateral Factors
We recommend aligning the collateral factors (CFs) and liquidation factors (LFs) for cbBTC, tBTC, and wstETH with those in the USDC Comet. For WETH, USDe, and sUSDe, the CFs and LFs remain unchanged from the previous post. Regarding sUSDS, the ERC-4626 implementation eliminates the need for external oracles.
The visualization below shows the volatility of sDAI/DAI, which we assume will have a similar distribution. Given the ongoing migration, we anticipate periods of elevated volatility and therefore recommend a buffer of 2x the annualized log volatility, as outlined in our previous formula.
Would further transform to:
The Annualized Log Vol stands at 1.8%, with a 2x buffer, we therefore, recommend a CF of 88% and an LF of 92%.
sDAI/DAI Volatility
Storefront price factor: 60%
Targetted Reserves: 20M
IR Curve Parameters
Gauntlet recommends aligning the IR parameters to those of stablecoin comets :
| Parameter | Recommended Value |
|---|---|
| Annual Borrow Interest Rate Base | 0.015 |
| Annual Borrow Interest Rate Slope Low | 0.0333 |
| Borrow Kink | 0.9 |
| Annual Borrow Interest Rate Slope High | 4.0 |
| Annual Supply Interest Rate Base | 0 |
| Annual Supply Interest Rate Slope Low | 0.039 |
| Supply Kink | 0.9 |
| Annual Supply Interest Rate Slope High | 3.6 |
Utilization vs APRs & Reserve Factor
At 90% kink, the Borrow APR is 4.5% and Supply APR is 3.51%, the comet will have positive reserve growth when the utilization is >72%
Incentive Parameters
COMP rewards recommendations are designed to offer appealing distribution APRs when the comets are first launched and when supply caps are highly utilized.
Gauntlet is recommending supply rewards to incentivize a more significant inflow of supply tokens into the protocol. This is important in the early stages of protocol growth before borrowers can join. Daily COMP rewards are subject to change as TVL rises and the markets evolve.
| Daily COMP Supply Rewards | Daily COMP Borrow Rewards |
|---|---|
| 25 | 25 |
With the above utilization and the present Interest Rate curve:
- Supply APR: 3.51%
- Borrow APR: 4.5%
Given the current COMP price of $45 at 90% utilization with $158M supplied and $142M Borrowed:
- Supply Distribution APR: 0.26%
- Borrow Distribution APR: 0.29%
This results in the following Net APRs:
- Net Supply APR: 3.77%
- Net Borrow APR: 4.21%