[Gauntlet] Arbitrum v3 WETH Comet Asset Listing
Simple Summary
We recommend the following initial parameter recommendations for the Arbitrum v3 WETH comet:
Risk Parameters
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| rETH | 90% | 93% | 3% | 800 ($3.4M) |
| wstETH | 88% | 93% | 3% | 2,000 ($9.1M) |
| weETH | 82% | 87% | 8% | 550 ($2.2M) |
Gauntlet recommends adding weETH in this initial listing for this ARB Comet. We have already done a full analysis for adding weETH to Ethereum WETH Comet. Gauntlet recommends a lower supply cap based on current on-chain liquidity. The chart below exhibits the weETH liquidity TVL across Arbitrum ecosystem.
Storefront Price Factor: 70%
Gauntlet recommends keeping the Store Front Price Factor at the same value as the Ethereum v3 WETH Comet.
Target Reserves: 5000
After Gauntlet’s forum post analyzing Target Reserves, Gauntlet recommends the following Target Reserves.
IR Curve Parameters
IR Curve Parameters
Gauntlet recommends the following IR parameters for the WETH Comet:
| Parameter | Recommended Value |
|---|---|
| Annual Supply Interest Rate Base | 0 |
| Annual Supply Interest Rate Slope Low | 0.0185 |
| Supply Kink | 0.85 |
| Annual Supply Interest Rate Slope High | 1 |
| Annual Borrow Interest Rate Base | 0.01 |
| Annual Borrow Interest Rate Slope Low | 0.014 |
| Borrow Kink | 0.85 |
| Annual Borrow Interest Rate Slope High | 1.15 |
The chart above demonstrates that the generation of Comet WETH reserves will be positive when utilization exceeds 61%.
Considering the market equilibrium assumption of reaching 85% utilization, the following chart forecasts annualized reserves corresponding to various borrowing amounts. At $12M borrowed, the Comet would generate annual reserves of $40k.
Incentive Parameters
Our 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 higher supply rewards to incentivize a more significant inflow of supply tokens into the protocol. This is important in the early stages of protocol growth since WETH supply is required before borrowers can join. Daily COMP rewards are subject to change as TVL rises and the markets evolve.
WETH Comet Incentives
| Daily COMP Supply Rewards | Daily COMP Borrow Rewards |
|---|---|
| 6 | 4 |
Here’s an update on the current COMP rewards structure in Arbitrum v3 WETH:
- Daily COMP Supply Rewards: 6 COMP
- Daily COMP Borrow Rewards: 4 COMP
Assuming full usage of supply caps and current liquidation factors, the total borrowing power would be $13.4M.
Here’s a breakdown based on our assumptions:
- Borrow Usage (80%): This leads to a borrowing volume of $10.8M.
- Utilization (85%): Corresponding to a supply volume of $12.7M.
With the above utilization and the present Interest Rate curve:
- Supply APR: 1.57%
- Borrow APR: 2.19%
Given the current COMP price of $60:
- Supply Distribution APR: 1.03%
- Borrow Distribution APR: 1.01%
This results in the following Net APRs:
- Net Supply APR: 2.61%
- Net Borrow APR: 1.18%
The chart above illustrates the Distribution Annual Percentage Rates (APRs) across various supply levels, assuming a 85% utilization rate. It’s noteworthy that APRs exceeding 2% will persist until the market’s supply reaches $7.5M. These incentive distributions are strategically designed to accelerate the WETH Comet. The current projected net APRs are within reasonable ranges.
Next Steps
We welcome community feedback.