Simple Summary
Gauntlet recommends decreasing the Liquidation Factor for the following collateral assets on Compound v3 Base USDbC.
Specifically, Gauntlet recommends the following changes:
- Decrease WETH Liquidation Collateral Factor from 84% to 74%
- Decrease cbETH Liquidation Collateral Factor from 80% to 70%
- Decrease WETH Borrow Collateral Factor from 79% to 69%
- Decrease cbETH Borrow Collateral Factor from 75% to 65%
- Decreasee WETH Supply Cap from 11,000 to 1,100
- Decreasee cbETH Supply Cap from 7,500 to 350
Additionally, Gauntlet recommends updating the USDC IR curves to feature a 90% kink, leading to a 1.8% supply APR ( Current: 2.25%) and a 6.55% borrow APR ( Current: 4.5%).
Analysis
Risk-off Liquidations
The recommended Collateral Factor decreases would not currently cause new liquidatable user positions.
Relevant Users with Low Health Factors
When determining what user positions will be most affected by the recommended Collateral Factor decreases, we assess the following:
- Size of the position
- Health Factor of the position
- How much the position’s Health Factor will change due to the Collateral Factor changes
1) Size of the position
We only include positions that have > $5k borrows.
2) Health Factor of the position
We only include positions whose Health Factors are less than 1.17 (Borrow Usage greater than 85%) after the Collateral Factor decreases.
3) How much the position’s Health Factor will change due to the Collateral Factor changes
We only show accounts that become > 5% closer to becoming liquidatable due to the Collateral Factor decreases. For example, a user may have a position with a Health Factor of 1.1, with 99% of their supply in ETH and 1% in COMP. In this case, leaving ETH Collateral Factor unchanged and decreasing COMP CF by 5% will not significantly impact this user’s Health Factor. As a result, we will not show these types of positions.
The below figure shows the top 4 highest borrowing user positions whose Health Factors are less than 1.17 (Borrow Usage greater than 85%) and become > 5% closer to becoming liquidatable after the Collateral Factor decreases.
The table below shows all positions > $5k borrows whose Health Factors are less than 1.17 (Borrow Usage greater than 85%) and become > 5% closer to becoming liquidatable after the Collateral Factor decreases.
| User Address | Total Supply Balance (USD) | Total Borrow Balance (USD) | Initial Borrow Usage | New Borrow Usage | Initial Health Factor | New Health Factor | % Closer to Liquidation | |
|---|---|---|---|---|---|---|---|---|
| 0 | 0xd4c11f913474b16933bb2699eb047465324d7ff1 | $835.2k | $537.8k | 76.65% | 87.01% | 1.305 | 1.149 | 44.37% |
| 1 | 0x4aec8c520a4436ab7345de589480d4e2a10ae8f2 | $11.4k | $7.3k | 75.9% | 86.16% | 1.318 | 1.161 | 42.57% |
| 1 | 0x853307f8324da4b39b9956c7eb76de18879e3fda | $10.9k | $6.9k | 75.13% | 85.28% | 1.331 | 1.173 | 40.81% |
| 3 | 0xcbaa5f67345ae7e330e30de3500028295233b3f7 | $7.9k | $5.3k | 80.17% | 91.01% | 1.247 | 1.099 | 54.66% |
In total, these positions have $557k borrows.
We will continue to rerun these liquidation analyses and update the community if the Collateral Factor decreases cause any risk-off liquidations and/or relevant Health Factor decreases.
Caps
This graph shows the supply cap usage (supply / supply cap) of all collateral assets over the past week.
IR Curve Recommendations
Gauntlet also recommends setting the Base USDbC IR curves to the following parameters:
| Parameter | Recommended Value |
|---|---|
| Annual Supply Interest Rate Base | 0 |
| Annual Supply Interest Rate Slope Low | 0.025 |
| Supply Kink | 0.9 |
| Annual Supply Interest Rate Slope High | 4.3 |
| Annual Borrow Interest Rate Base | 0.025 |
| Annual Borrow Interest Rate Slope Low | 0.045 |
| Borrow Kink | 0.9 |
| Annual Borrow Interest Rate Slope High | 6 |
Next Steps
- Welcome feedback from the community
- Post recommendations to on-chain proposal
Note: The data provided in this document is accurate as of the publication date. Market conditions and liquidity levels may change, and it is advisable to regularly review these parameters to ensure they remain appropriate.