Add Market USDS on Arbitrum

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Add Market USDS on Arbitrum

Summary

The Compound Growth program proposes the addition of the USDS market on Base. As the SKY ecosystem is expanding to Base, Compound can capture the opportunity by being the preferred platform for USDS holders on Base in the early days

Motivation

The USDS market was launched on Compound on mainnet markets in Q4 2024 with partnership of Sky BD Team. Since then the market has grown to add almost around 20M in TVL. There is only 1M of USDS but around 100M worth of sUSDS on base currently. As the liquidity of USDS improves on Base, the competition to attract deposits from USDS holders will increase, so we want to be early in adopting the USDS market

Point of Contact: sharp , Carter

Proposed Collateral

We propose adding the following asset as collaterals for the market

  • sUSDS
  • ETH
  • weETH
  • tBTC
  • wstETH

We invite the community to suggest and give inputs for any other collateral assets.

Relevant Statistics and Links

Website: https://sky.money/

Twitter: x.com

CoinmarketCap: USDS price today, USDS to USD live price, marketcap and chart | CoinMarketCap

Next Steps

We invite the community to consider this application for listing the USDS market and welcome suggestions in this direction.

Additionally, we look forward to the community to suggest

Collateral Factor

Reserve Factor

Borrowing Limit

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I’m seeing:

  • “Add Market Base on Arbitrum” (?)
  • “Proposing addition of USDS market on Base” (ok, i think this is the purpose)
  • “Consider this application for listing the USDT market” (?)

It appears some detail is needing to be edited here

3 Likes
3

Thank you for pointing it out, I have changed the title

1 Like
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[Gauntlet] - Arbitrum USDS Comet Recommendations

Simple Summary

If the community wishes to launch the Arbitrum v3 USDS comet, Gauntlet recommends the below risk parameters:

Risk Parameters

Asset Collateral Factor Liquidation Factor Liquidation Penalty Supply Cap
sUSDS 93% 95% 4% 25,000,000 sUSDS

Analysis

Supply Caps and Liquidation Penalty

USDS DEX TVL

pool_name pool_type pool_url pool_tvl_usd volume_24h_usd
USDS / USDC 0.005% camelot-v3 Link $490.38K $6.66K
USDS / SPA 0.3% uniswap_v3_arbitrum Link $144.64K $11.56K
SPA / USDS 0.592% camelot-v3 Link $142.63K $13.34K
USDS / USDC 0.05% uniswap_v3_arbitrum Link $110.34K $1.60K

Gauntlet has conducted an analysis of the liquidity pathways from the proposed and alternative collateral assets—including sUSDS, WETH, weWETH, wstETH, and tBTC—to USDS. The review indicates that, with the exception of sUSDS, liquidity routes to these assets are either limited or insufficient (refer to the slippage analysis below). Based on these findings, we recommend onboarding sUSDS as a collateral asset at this time. Additionally, we propose aligning the liquidation penalty for sUSDS with that of sUSDS on the Base Comet.

Slippage Analysis

A $1M swap between WETH, weETH, wstETH, or tBTC and USDS would result in over 50% slippage, indicating extremely poor liquidity for these pairs. This high level of slippage suggests that large transactions would significantly impact market prices, leading to inefficient capital movement and potential price distortions.

Onboarding these assets as collateral under current liquidity conditions poses a significant risk with limited reserve growth potential for the protocol.

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Onchain Market cap

If the community wishes to launch the Arbitrum v3 USDS, Gauntlet recommends setting the supply caps to the following:

Asset Supply Cap
sUSDS 25,000,000

Collateral Factors (CF) and Liquidation Factors (LF)

We recommends adjusting the CF and LFs with respect to the recommended Liquidation Penalties (LP). The recommended values are as follows:

Asset Collateral Factor Liquidation Factor
sUSDS 93% 95%
  • Storefront price factor: 60%
  • Targetted Reserves: 20M
  • Seed Reserves: 100,000 USDS

IR Curve Parameters

We recommend 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 0.05
Borrow Kink 0.9
Annual Borrow Interest Rate Slope High 3.4
Annual Supply Interest Rate Base 0
Annual Supply Interest Rate Slope Low 0.054
Supply Kink 0.9
Annual Supply Interest Rate Slope High 3.034

Utilization vs APRs & Reserve Factor

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With a 90% kink, the Borrow APR is 6% and the Supply APR is 4.86%. The comet will experience positive reserve growth when utilization exceeds 72%.

Incentive Parameters

Our COMP rewards strategy aims to provide attractive distribution APRs, particularly during the initial launch of Comets and periods of high supply cap utilization.

Gauntlet recommends supply rewards to encourage a greater influx of supply tokens into the protocol, which is crucial in the early growth phase before borrower participation increases. Daily COMP rewards may be adjusted as TVL expands and market conditions evolve.

Daily COMP Supply Rewards Daily COMP Borrow Rewards
24 12

With the above utilization and the present Interest Rate curve:

  • Supply APR: 4.86%
  • Borrow APR: 6.00%

Given the current COMP price of $50 at 90% utilization:

  • Supply Distribution APR: 3.47%
  • Borrow Distribution APR: 1.92%

This results in the following Net APRs:

  • Net Supply APR: 8.33%
  • Net Borrow APR: 4.08%
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