[Gauntlet] - Ronin Recommendations
Simple Summary
If the community wishes to deploy on Ronin, we recommend the following initial parameter recommendations for the Ronin v3 USDC, RON and WETH comets:
Risk Parameters
USDC Comet
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| RON | 73% | 79% | 17% | 1M RON |
| WETH | 83% | 90% | 5% | 110 WETH |
| AXS | 68% | 75% | 20% | 150K AXS |
WETH Comet
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| RON | 75% | 80% | 12% | 3M RON |
| USDC | 83% | 90% | 5% | 400K USDC |
| AXS | 70% | 75% | 20% | 300K AXS |
RON Comet
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| USDC | 75% | 80% | 12% | 500K USDC |
| WETH | 75% | 80% | 10% | 500 WETH |
| AXS | 72% | 78% | 15% | 300K AXS |
Rationale
Supply Caps and Liquidation Penalty
WRON DEX TVL across majors
| Pool Type | Pool Name | Pool URL | TVL ($M) | 24H Volume ($) |
|---|---|---|---|---|
| Katana | WRON / WETH | Link | 41.82 | 1.17M |
| Katana | AXS / WRON | Link | 13.97 | 715.7K |
| Katana | USDC / WRON | Link | 13.89 | 1.85M |
| Katana-V3 | WETH / WRON 0.3% | Link | 0.84 | 181.7K |
| Katana-V3 | USDC / WRON 0.3% | Link | 0.84 | 141.8K |
Total DEX TVL : $70.52M
USDC DEX TVL across majors
| Pool Type | Pool Name | Pool URL | TVL ($M) | 24H Volume ($) |
|---|---|---|---|---|
| Katana | USDC / WRON | Link | 14.08 | 1.45M |
| Katana | USDC / WETH | Link | 2.74 | 269K |
| Katana-V3 | USDC / WRON 0.3% | Link | 0.86 | 168.5K |
| Katana | AXS / USDC | Link | 0.04 | 5.6K |
Total DEX TVL : $17.72M
WETH DEX TVL across majors
| Pool Type | Pool Name | Pool URL | TVL ($M) | 24H Volume ($) |
|---|---|---|---|---|
| Katana | WRON / WETH | Link | 41.75 | 1.45M |
| Katana | USDC / WETH | Link | 2.74 | 269K |
| Katana | AXS / WETH | Link | 1.99 | 68.1K |
| Katana-V3 | WETH / WRON 0.3% | Link | 0.85 | 308.1K |
Total DEX TVL : $47.33M
AXS DEX TVL
| Pool Type | Pool Name | Pool URL | TVL ($M) | 24H Volume ($) |
|---|---|---|---|---|
| Katana | AXS / WRON | Link | 14.12 | 325.3K |
| Katana | AXS / WETH | Link | 1.99 | 68.1K |
| Katana-V3 | AXS / WRON 0.3% | Link | 0.10 | 14.2K |
| Katana | AXS / USDC | Link | 0.04 | 5.6K |
| Katana-V3 | AXS / WRON 1% | Link | 0.02 | 850 |
| Katana-V3 | AXS / USDC 1% | Link | 0.01 | 0.24 |
Total DEV TVL : $16.28M
USDC Comet
Reviewing the liquidity pathways from the collateral assets to USDC, Gauntlet recommends aligning the LP to that of WETH, LINK and UNI on the Mainnet USDC comets.
| Asset | Liquidation Penalty |
|---|---|
| RON | 17% |
| WETH | 5% |
| AXS | 20% |
Gauntlet recommends setting the supply caps to the levels suggested below for the following assets on USDC Comet:
| Asset | Supply Cap |
|---|---|
| RON | 1M |
| WETH | 110 |
| AXS | 150K |
RON-USDC DEX Slippage
WETH-USDC DEX Slippage
AXS-USDC DEX Slippage
WETH Comet
For WETH Comet, Gauntlet recommends the following Liquidation Penalties:
| Asset | Liquidation Penalty |
|---|---|
| RON | 12% |
| USDC | 5% |
| AXS | 20% |
Gauntlet recommends setting asset supply caps at the levels suggested below:
| Asset | Supply Cap |
|---|---|
| RON | 3M |
| USDC | 400K |
| AXS | 300K |
RON-WETH DEX Slippage
USDC-WETH DEX Slippage
AXS-WETH DEX Slippage
RON Comet
For the RON Comet, Gauntlet recommends the below Liquidation Penalties (LP):
| Asset | Liquidation Penalty |
|---|---|
| USDC | 12% |
| WETH | 10% |
| AXS | 15% |
Gauntlet recommends setting asset supply caps at the following levels:
| Asset | Supply Cap |
|---|---|
| USDC | 500K |
| WETH | 500 |
| AXS | 200K |
USDC-RON DEX Slippage
WETH-RON DEX Slippage
AXS-RON DEX Slippage
Collateral Factors (CF) and Liquidation Factors (LF)
USDC Comet
RON-USDC - Drawdowns and Returns in the past 6 months
AXS-USDC - Drawdowns and returns in the past 6 months
For WETH, Gauntlet recommends aligning the Collateral Factor and Liquidation Factor to that of the Mainnet USDC comet.
| Asset | Collateral Factor | Liquidation Factor |
|---|---|---|
| RON | 73% | 79% |
| WETH | 83% | 90% |
| AXS | 68% | 75% |
A 1% delta between the Liquidation Factor and Liquidation Penalty as recommended by ChainRisk is too low as during extremely volatile regimes, liquidations might be inefficient if the price of WETH drops beyond 2% post absorption of collateral. We know:
Liquidation Factor ≤ (1 - Liquidation Penalty) × (1 - x)
A 1.2% price drop between blocks would require the Liquidation Factor to be below 88.9%, with Liquidation Factor of 89%, it is insufficient to liquidate collateral effectively, potentially leading to insolvency.
WETH Comet
RON-WETH - Drawdowns and returns in the past 6 months
AXS-WETH - Drawdowns and returns in the past 6 months
For USDC, Gauntlet recommends aligning the Collateral Factor and Liquidation Factor to that of the Optimism USDC comet:
| Asset | Collateral Factor | Liquidation Factor |
|---|---|---|
| RON | 75% | 80% |
| USDC | 83% | 90% |
| AXS | 70% | 75% |
As seen from above, WETH pairs are less volatile and more correlated than USDC pairs and therefore can be more risk-on in terms of CFs and LFs with respect to USDC in terms of supply-borrow distribution unlike the risk recommendations proposed by ChainRisk. Furthermore, the RON-WETH pool is the most liquid pool on Ronin which can imply a lower liquidation penalty compared to RON-USDC pair.
RON Comet
USDC-RON - Drawdowns and returns in the past 6 months
WETH-RON - Drawdowns and returns in the past 6 months
AXS-RON - Drawdowns and returns in the past 6 months
| Asset | Collateral Factor | Liquidation Factor |
|---|---|---|
| USDC | 75% | 80% |
| WETH | 75% | 80% |
| AXS | 72% | 78% |
For USDC Comet
Targetted Reserves: 20M USDC
Storefront price factor: 60%
Seed reserves: $50k
For WETH Comet
Targetted Reserves: 5000 WETH
Storefront price factor: 70%
Seed reserves: 25 WETH
For RON Comet
Targeted Reserves: 20M RON
Storefront price factor: 70%
Seed reserves: $50k
IR Curve Parameters
Gauntlet recommends aligning the IR parameters to those comets on Mainnet :
USDC Comet
Recommended Parameter Adjustments
| 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
WETH Comet
Recommended Parameter Adjustments
| Parameter | Recommended Value |
|---|---|
| Annual Borrow Interest Rate Base | 0.01 |
| Annual Borrow Interest Rate Slope Low | 0.0155 |
| Borrow Kink | 0.9 |
| Annual Borrow Interest Rate Slope High | 1.26 |
| Annual Supply Interest Rate Base | 0 |
| Annual Supply Interest Rate Slope Low | 0.0216 |
| Supply Kink | 0.9 |
| Annual Supply Interest Rate Slope High | 1.125 |
Utilization vs APRs & Reserve Factor
RON Comet
Gauntlet recommends setting the IR curves mirroring those recommended for the S Comet on Sonic:
| Parameter | Recommended Value |
|---|---|
| Annual Borrow Interest Rate Base | 0.01 |
| Annual Borrow Interest Rate Slope Low | 0.017647 |
| Borrow Kink | 0.85 |
| Annual Borrow Interest Rate Slope High | 1.5 |
| Annual Supply Interest Rate Base | 0 |
| Annual Supply Interest Rate Slope Low | 0.0225 |
| Supply Kink | 0.85 |
| Annual Supply Interest Rate Slope High | 1.339 |
Utilization vs APRs & Reserve Factor
Incentive Parameters
For USDC Comet
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 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 |
|---|---|
| 2 | 1 |
With the above utilization and the present Interest Rate curve, for Stablecoin comets:
- Supply APR: 6%
- Borrow APR: 4.8%
Given the current COMP price of $50 at 90% utilization:
- Supply Distribution APR: 4.31%
- Borrow Distribution APR: 2.39%
This results in the following Net APRs:
- Net Supply APR: 9.17%
- Net Borrow APR: 3.61%
For WETH Comet
| Daily COMP Supply Rewards | Daily COMP Borrow Rewards |
|---|---|
| 2 | 1 |
With the above utilization and the present Interest Rate curve, for WETH comets:
- Supply APR: 1.94%
- Borrow APR: 2.4%
Given the current COMP price of $50 at 90% utilization:
- Supply Distribution APR: 1.8%
- Borrow Distribution APR: 1%
This results in the following Net APRs:
- Net Supply APR: 3.74%
- Net Borrow APR: 1.4%
For RON Comet
| Daily COMP Supply Rewards | Daily COMP Borrow Rewards |
|---|---|
| 1 | 0 |
With the above utilization and the present Interest Rate curve :
- Supply APR: 1.94%
- Borrow APR: 2.5%
Given the current COMP price of $50 at 90% utilization:
- Supply Distribution APR: 1.85%
- Borrow Distribution APR: 0%
This results in the following Net APRs:
- Net Supply APR: 3.76%
- Net Borrow APR: 2.5%