[Gauntlet] Optimism v3 USDT & USDC Initial Asset Listing Recommendations
Simple Summary
Gauntlet is excited for the Compound community to expand into Optimism. We recommend the following initial parameter recommendations for the USDT and USDC Comets on Optimism.
Asset Recommendation
USDT Risk Parameters
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| WETH | 83% | 90% | 5% | 1,600 ($5.1M) |
| WBTC | 80% | 85% | 5% | 60 ($3.3M) |
| OP | 65% | 70% | 20% | 400,000 ($1.5M) |
| wstETH | 75% | 80% | 10% | 300 ($1.1M) |
USDC Risk Parameters
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| WETH | 83% | 90% | 5% | 1,600 ($5.1M) |
| WBTC | 80% | 85% | 5% | 60 ($3.3M) |
| OP | 65% | 70% | 20% | 700,000 ($2.7M) |
| wstETH | 75% | 80% | 10% | 500 ($1.8M) |
Gauntlet recommends against listing LDO and LINK based on their liquidity on decentralized exchanges (DEX). Presently, exchanging 4,000 LDO (valued at $12,000) for USDT results in a 32% slippage, while swapping 20,000 LINK (worth $389,000) incurs a 15% slippage. USDC cap recommendations are higher than USDT, reflecting the higher liquidity paths to USDC relative to USDT within decentralized exchange liquidity.
Storefront Price Factor: 60%
Gauntlet recommends keeping the storefront price factor at 60% for both Comets.
Target Reserves: 20,000,000
After Gauntlet’s forum post analyzing Target Reserves, Gauntlet recommends a target reserve of 20M for both Comets.
IR Curve Parameters
Gauntlet recommends the following IR parameters for USDC and USDT Comets:
| IR Parameter | Value |
|---|---|
| borrow per year interest rate base | 0.015 |
| borrow per year interest rate slope low | 0.061 |
| borrow kink | 0.90 |
| borrow per year interest rate slope high | 3.2 |
| supply per year interest rate base | 0 |
| supply per year interest rate slope low | 0.059 |
| supply kink | 0.90 |
| supply per year interest rate slope high | 2.9 |
The chart above demonstrates that the generation of Comet USDT reserves will be positive when utilization exceeds 72%.
Considering the market equilibrium assumption of reaching 90% utilization, the following chart forecasts annualized reserves corresponding to various borrowing amounts. At $10M borrows, the Comets would generate annual reserves of $98k.
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 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 USDT and USDC supply are required before borrowers can join. Daily COMP rewards are subject to change as TVL rises and the markets evolve.
USDT Comet Incentives
| Daily COMP Supply Rewards | Daily COMP Borrow Rewards |
|---|---|
| 5 | 5 |
Here’s an update on the current COMP rewards structure in Optimism v3 USDT:
- Daily COMP Supply Rewards: 5 COMP
- Daily COMP Borrow Rewards: 5 COMP
Assuming full usage of supply caps and current liquidation factors, the total borrowing power would be $9.3M.
Here’s a breakdown based on our assumptions:
- Borrow Usage (60%): This leads to a borrowing volume of $5.5M.
- Utilization (90%): Corresponding to a supply volume of $6.2M.
With the above utilization and the present Interest Rate curve:
- Supply APR: 5.31%
- Borrow APR: 6.99%
Given the current COMP price of $78:
- Supply Distribution APR: 2.29%
- Borrow Distribution APR: 2.54%
This results in the following Net APRs:
- Net Supply APR: 7.60%
- Net Borrow APR: 4.45%
USDC Comet Incentives
| Daily COMP Supply Rewards | Daily COMP Borrow Rewards |
|---|---|
| 5 | 5 |
Here’s an update on the current COMP rewards structure in Optimism v3 USDC:
- Daily COMP Supply Rewards: 5 COMP
- Daily COMP Borrow Rewards: 5 COMP
Assuming full usage of supply caps and current liquidation factors, the total borrowing power would be $10.7M.
Here’s a breakdown based on our assumptions:
- Borrow Usage (60%): This leads to a borrowing volume of $6.4M.
- Utilization (90%): Corresponding to a supply volume of $7.1M.
With the above utilization and the present Interest Rate curve:
- Supply APR: 5.31%
- Borrow APR: 6.99%
Given the current COMP price of $78:
- Supply Distribution APR: 1.99%
- Borrow Distribution APR: 2.21%
This results in the following Net APRs:
- Net Supply APR: 7.30%
- Net Borrow APR: 4.78%
The chart above illustrates the Distribution Annual Percentage Rates (APRs) across various supply levels, assuming a 90% utilization rate. It’s noteworthy that APRs exceeding 2% will persist until the market’s supply reaches $8M. These incentive distributions are strategically designed to accelerate the USDT and USDC Comets. The current projected net APRs are within reasonable ranges.
Gauntlet welcomes any community feedback.